Bluefly Inc, an Internet retailer of designer fashions at outlet store prices, announced today that it converted $20m of outstanding debt into preferred equity as part of the second phase of its investment agreement with affiliates of Soros Private Equity Partners. The company also revealed that, as part of the third and final phase of its investment agreement with affiliates of Soros, it has commenced a $20m rights offering to all common stockholders of record on February 7, 2001.