Fashion retailer Forever 21 files for bankruptcy, adding to retail apocalypse, bowing to high rents, fierce competition
- The clothing chain closed its last shop in Hong Kong last week after months of volatile street protests added to its woes
- Court papers filed in the Bankruptcy Court for the District of Delaware show Forever 21 has estimated liabilities of between US$1 billion and US$10 billion
Forever 21, which closed down its last shop in Hong Kong last week, has filed for bankruptcy protection, adding another big fashion merchant to the tally of retailers who couldn’t cope with high rents and heavy competition.
Court papers filed in the Bankruptcy Court for the District of Delaware show Forever 21 has estimated liabilities on a consolidated basis of between US$1 billion and US$10 billion. The Chapter 11 filing allows the Los Angeles-based company to keep operating while it works out a plan to pay its creditors and turn around the business.
Forever 21 has obtained US$275 million in financing from lenders with JPMorgan Chase & Co as agent, as well as US$75 million in new capital from TPG Sixth Street Partners and its affiliated funds.
“The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the US and abroad to revitalise our brand and fuel our growth, allowing us to meet our ongoing obligations to customers, vendors and employees,” Linda Chang, executive vice president of Forever 21, said in a statement.
A bankruptcy filing could help Forever 21 get rid of unprofitable stores and raise fresh funds. This could be problematic for major US mall owners, including Simon Property Group and Brookfield Property Partners, because Forever 21 is one of the biggest mall tenants still standing after a wave of bankruptcies. The busts emptied more than 12,000 stores in the past two years, and those vacancies may be hard to fill.