Forever 21 hopes to dodge bankruptcy through restructuring
Two weeks after news surfaced that the teen fashion retailer was exploring a range of options to turn its business around, Forever 21 has reportedly hired a restructuring advisor in the hopes of averting bankruptcy.
According to people familiar with the matter cited by The Wall Street Journal on Tuesday, the Los Angeles-based retailer founded by Don Won Chang is hoping to negotiate store closures and secure a new loan, having used a previous loan from JP Morgan Chase to cover its losses, rather than to purchase merchandise for its stores.
Forever 21 has reportedly contracted Latham & Watkins LLP and Alvarez & Marshall, tasking the former with renegotiating its lease terms with landlords, while the latter will lead efforts to restructure the company’s operations.
According to Bloomberg, the company has approximately $500 million in debt in a first-lien asset-based revolver that will come to term in 2022.
The retailer does not publish financials but has been under increasing pressure over the last few years, as e-commerce rivals such as Lulus, Boohoo and Fashion Nova have gained ground in fashion retail.
As a result, Forever 21 is reportedly suffering from declining sales and dwindling cash reserves. Its international operations have also been struggling: the company shuttered its French business in January of this year and recently pulled out of China.
The retailer is just the latest in a series of mainly brick-and-mortar youth-focused fashion retailers that have been struggling in recent years, including American Apparel and Rue21, both of which ultimately declared bankruptcy before making their respective comebacks.
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