NEW YORK CITY-It’s almost better than a sample sale. Luxury retailer Barney’s New York has partnered with hedge fund sponsor Perry Capital and the Yucaipa Cos. to convert debt for equity in reducing long-term debt for the company by more than $500 million, the retailer unveiled late Monday. Under an agreement with Perry and the sponsor, Istithmar World, the partners will cut Barney’s debt from $590 to $50 million in an effort to improve the company’s capital structure and grow the business.

The deal, which Barney’s CEO Mark Lee describes as a “defining moment in the history” of the specialty retailer, will provide the company with the funding to accelerate the execution of its new business strategy. “This agreement provides us with increased free cash flow that will be used to revitalize our stores, invest in Barneys.com and further enhance our customer experience at a time when our operational financial performance is very strong,” he says, in a statement. “Our customers, vendors and employees will benefit from this significant deleveraging which will reinforce Barneys' unique position as the preeminent luxury specialty retailer."

Perry Capital is becoming majority owner at a time when Barney’s reported double-digit comparable sales growth and a 40% increase in annual EBITDA for the full year in 2011 compared to 2010.