Forever 21 Files for Chapter 11
Forever 21 and its U.S. subsidiaries have filed for voluntary Chapter 11. The retailer also announced that its Canadian subsidiary filed for and was granted protection under the Companies’ Creditors Arrangement Act by the Ontario Superior Court of Justice (Commercial List) in Toronto.
Forever 21 will use these proceedings to facilitate a global restructuring that will allow it to focus on the profitable parts of its operations. As part of its restructuring strategy, the retailer plans to exit most of its international locations in Asia and Europe, but will continue operations in Mexico and Latin America.
The retailer has requested approval to shutter up to 178 U.S. stores and up to 350 in total, the New York Times reported.
“This was an important and necessary step to secure the future of our company, which will enable us to reorganize our business and reposition Forever 21,” said Linda Chang, executive vice president of Forever 21.
To facilitate its restructuring, Forever 21 has obtained $275 million in financing from its existing lenders with JPMorgan Chase Bank, N.A. as agent, as well as $75 million in new capital from TPG Sixth Street Partners, and certain of its affiliated funds. With this capital, Forever 21 intends to operate in a business as usual manner, honoring all company policies, including gift cards, returns, exchanges, reimbursement and sale purchases. Forever 21 will use these proceedings to right size its store base and return to basics that allowed it to thrive and grow into the fast fashion leader.
“The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the U.S. and abroad to revitalize our brand and fuel our growth, allowing us to meet our ongoing obligations to customers, vendors and employees,” said Chang. “With support from our key landlord and vendor constituents, we are confident we will emerge as a stronger, more competitive enterprise that is better positioned to prosper for years to come, and we remain committed to delivering the fast fashion trends that our customers have come to expect from Forever 21.”