Bloomberg first reported Aug. 28 that Forever 21 was preparing for a bankruptcy filing.
Mall Woes
Forever 21’s bankruptcy filing could be problematic for major U.S. mall owners, including Simon and Brookfield because it 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.
Simon counts Forever 21 as its sixth-largest tenant excluding department stores, with 99 outlets covering 1.5 million square feet as of March 31, according to a filing.
Simon and Brookfield were both listed in court papers on Forever 21’s tally of biggest unsecured creditors. The retailer doesn’t have a lot of leverage over its landlords, according to Bloomberg Intelligence, which said in a Sept. 27 report that Forever 21 accounts for just 1.4% of Simon’s annual rent.
Founded in 1984, Forever 21 specializes in fast-fashion apparel-- trendy, cheap, quickly-made knockoffs of original designs that often is worn only a few times before being given away or tossed out. Competitors include Zara, H&M and Amazon.com.
Co-founder Do Won Chang has been focused on maintaining a controlling stake in Forever 21, which hindered efforts to raise new funds. Matters are likely to be out of his hands now, with creditors typically setting the agenda in bankruptcy proceedings and major decisions subject to a judge’s approval.
Kirkland & Ellis LLP is the company’s legal adviser, and Alvarez & Marsal is the restructuring adviser, and the investment banker is Lazard.
This story provided by Bloomberg News.