Bluefly Soars On With $10 Million In New Working Capital

Bluefly, Inc. a leading Internet retailer of designer fashions and home furnishings at outlet store prices (www.bluefly.com), announced today that an investor group led by affiliates of Soros Private Equity Partners LLC has agreed to invest $10 million in Bluefly.com, in a transaction that will provide capital to accelerate the company's marketing and advertising efforts and aggressively build inventory in time for the Christmas shopping season. The investor group also includes Pilot Capital Corporation, a firm specializing in private equity investments in technology companies. Pilot was founded in 1987 by Robert McCabe, a former partner at Lehman Brothers.
     "Over the past few months, we have explored strategic investment opportunities with a number of potential partners, including portals, other e-commerce retailers and brick-and-mortar apparel retailers," said Ken Seiff, Chief Executive Officer of Bluefly.com. "Although we saw many interesting opportunities, we feel that the Soros group best understood our business, and we are delighted to welcome them into our company as significant investors.
     Under the terms of the financing, the Soros led investor group will purchase preferred stock from the company, which is convertible into common stock at the rate of $10.50 per share. The company can force the conversion of the preferred stock at any time if the average closing price of its common stock is $31.50 or higher for thirty consecutive trading days. The investment will give the Soros led group a 19.5% voting and equity interest in Bluefly, making it the company's largest group of shareholders. The preferred stock will earn dividends at the rate of 8% per year, payable in cash or stock, at the company's option, upon conversion.