Forever 21 Inc., privately held company based in Los Angeles declared to close up to 178 stores in the U.S. The company filed for Chapter 11 bankruptcy protection, the latest big fashion merchant who couldn’t cope with high rents and heavy competition as the shift to e-commerce cut a swathe through traditional retailers.
Forever 21 Inc., privately held company based in Los Angeles declared to close up to 178 stores in the U.S. The company filed for Chapter 11 bankruptcy protection, the latest big fashion merchant who couldn’t cope with high rents and heavy competition as the shift to e-commerce cut a swathe through traditional retailers.As of the bankruptcy filing, the company operated about 800 stores globally, including more than 500 stores in the U.S.
The Chapter 11 filing in Wilmington, Delaware, allows the Los Angeles-based company to keep operating while it works out a plan to shut unprofitable stores in the U.S., pay its creditors and turn around the business. Forever 21 operates about 800 stores in the U.S., Europe, Asia and Latin America.
Forever 21 has obtained $275 million in financing from lenders with JPMorgan Chase as agent, as well as $75 million in new capital from TPG Sixth Street Partners and its affiliated funds. It plans to exit most of its international locations in Asia and Europe, but will continue operations in Mexico and Latin America.
“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,” Linda Chang, executive vice president of Forever 21, said in a statement.
Sources revealed, as Forever 21’s botched international expansion morphed into a money-loser, its owners turned to a funding source i.e. their own children.
Founders Jin Sook and Do Won Chang borrowed $5 million in 2015 from the trusts for each of their adult daughters, Linda and Esther Chang, paying them 2% interest. Now the offspring are named as unsecured creditors of their parents’ company infilings with Forever 21’s bankruptcy.
