Chapter 11 for Forever 21
The retail chain that embraces an eternal youthful disposition, Forever 21, may not be around for too much longer after the company voluntarily filed for Chapter 11 bankruptcy over the weekend.
Formally, Forever 21 announced that it and its U.S. subsidiaries have commenced voluntary Chapter 11 cases in the United States Bankruptcy Court for the District of Delaware. The company also announced that its Canadian subsidiary filed for and was granted protection under the Companies’ Creditors Arrangement Act.
Forever 21 intends to use these proceedings to facilitate a global restructuring that will allow the company to focus on a profitable core part of its operations. As part of its restructuring strategy, the company plans to exit most of its international locations in Asia and Europe, but it will continue operations in Mexico and Latin America.
To facilitate its restructuring, Forever 21 has obtained $275 million in financing from its existing lenders with JPMorgan 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.
Ultimately, Forever 21 will use these proceedings to rightsize its store base and return to basics that allowed the company to thrive and grow into the fast-fashion leader.
Linda Chang, executive vice president at Forever 21, commented:
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. 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.