Forever 21’s US operator files for Chapter 11 bankruptcy

Fast fashion brand Forever 21’s US operator and licensee F21 OpCo and its domestic subsidiaries have initiated voluntary Chapter 11 proceedings in the United States Bankruptcy Court for the District of Delaware.

The company aims for an orderly wind-down of its US operations while seeking potential buyers for a going concern transaction or asset sale.

The retailer has made a plan support agreement with its secured lenders to facilitate an efficient bankruptcy process. This agreement is structured to expedite the company's passage through bankruptcy.

Concurrently with liquidation sales at its stores, F21 OpCo will engage in a court-supervised sale and marketing process for its assets.

A motion will also be filed seeking permission for asset auctioning under section 363 of the Bankruptcy Code. A successful sale might allow the company to shift from winding down to maintaining ongoing operations.

Forever 21's US-based stores and website will continue operating during this transition.

Meanwhile, F21 OpCo has requested "first-day" reliefs from the court, including the use of cash collateral to maintain payroll, benefits anda other operational costs throughout the bankruptcy.

F21 OpCo has estimated its assets in the range of $100m to $500m, with liabilities between $1bn to $10bn, as reported by Reuters.

F21 OpCo chief financial officer Brad Sell stated: “Following the conclusion of our strategic review and after careful deliberation, we made the decision to file for chapter 11 to implement a court-supervised marketing process to solicit a going concern transaction, and, in the absence of such an arrangement, an orderly wind down of operations.

“While we have evaluated all options to best position the company for the future, we have been unable to find a sustainable path forward, given competition from foreign fast fashion companies, which have been able to take advantage of the de minimis [too small to be significant] exemption to undercut our brand on pricing and margin, as well as rising costs, economic challenges impacting our core customers, and evolving consumer trends.

“As we move through the process, we will work diligently to minimise the impact on our employees, customers, vendors and other stakeholders.”

Forever 21's international stores and e-commerce platforms, operated by separate licensees, are not affected by the US bankruptcy filings.

Authentic Brands Group retains ownership of the Forever 21 intellectual property and may seek new licensing agreements outside US operations.

"Forever 21’s US operator files for Chapter 11 bankruptcy" was originally created and published by Retail Insight Network, a GlobalData owned brand.