Forever 21 Inc. filed for bankruptcy protection. It is one of the big fashion merchants who were unable to cope with huge rents and fierce competition as the shift in e-commerce reduced the burden of traditional retailers. Court papers filed in Wilmington show that Forever 21 has assessed liabilities between US$ 1 Bn to 10 Bn. The Chapter 11 filing allows them to keep operating with the plan to pay creditors and expand the business. Generally known as a “reorganization” bankruptcy, the Chapter 11 filing assures that Forever 21 will maintain possession and control its assets along with restructuring.
The chain began to actively expand its menswear and footwear business after the financial crisis in 2008, competing with brands such as Hennes & Mauritz AB and Zara. The company also increased its global stores to 800. Mr. Do Won Chang, the Co-founder, is focusing on controlling stake in Forever 21, which hampered efforts to raise new funds. Forever 21 has received US$ 275 million from donors with JPMorgan Chase & Co. and TPG Sixth Street Partners and its associated funds. It proposes to exit most of its locations in Europe and Asia. The management announced that it is preparing to overhaul its business, shut down more than 300 stores, including as many as 178 in the US. The company, which currently has 549 US stores and 251 in other countries. But, the company will continue operations in Latin America and Mexico. The stores expect to honor returns, gift cards, and exchanges.
According to the New York Post, the retailer registered for bankruptcy protection on 29th September 2019. The company also recently tried to cut a deal in which its two biggest landlords, Brookfield Property Partners L.P. and Simon Property Group, Inc., would take an ownership stake. Forever 21 was given protection under the Companies’ Creditors Arrangement Act in the Ontario Court of Justice. PricewaterhouseCoopers Inc. will serve as its monitor in proceedings.