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 by the Ontario Superior Court of Justice (Commercial List) in Toronto. 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 will continue operations in Mexico and Latin America.
“This was an important and necessary step to secure the future of our Company, which will enable us to reorganize our business and reposition Forever 21,” Linda Chang, Executive Vice President of Forever 21, Inc., said.
The company enjoys and benefits from decades-long relationships with its vendors, and dozens have already agreed to support Forever 21’s restructuring efforts. To facilitate its restructuring, Forever 21 has obtained US$ 275 million in financing from its existing lenders with JPMorgan Chase Bank, N.A. as agent, as well as US$ 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. Forever 21 will use these proceedings to right size its store base and return to basics that allowed the company to thrive and grow into the fast fashion leader.
“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,” Chang further noted.
Kirkland & Ellis LLP is serving as the company’s legal advisor, Alvarez & Marsal as its restructuring advisor, and Lazard as its investment banker.