Forever 21 prepares for a potential bankruptcy filing.
Yes, your favorite store Forever 21 Inc. is preparing for a potential bankruptcy filing, Bloomberg reported Wednesday.
Forever 21 hired a team of advisers to help restructure their debt and has been in talks for additional financing, but negotiations with possible lenders have stalled.
Now, filing for Chapter 11 bankruptcy protection often involves some store closures as retailers look to end their leases on money-losing stores and cut loans.
Eric Snyder, a partner at New York-based law firm Wilk Auslander tried to further explain Forever 21’s bankruptcy plans.
“With 815 stores, many in undesirable malls, a bankruptcy filing gives Forever 21 the leverage to either renegotiate rents…”
“…which landlords are more than willing to do in this retail environment…”
“…or reject leases and free itself of liability for unprofitable stores,” USA Today quotes.
A bankruptcy filing would help the Los Angeles company shed unprofitable stores and recapitalize the business, said the people, who requested not to be named as discussing private negotiations.
Co-founder Do Won Chang had been focused on maintaining a controlling stake in the company, which limited its fundraising options.
A faction of Forever 21 officials, without Chang’s approval, had asked its biggest landlords to consider taking a stake in the company amid a disagreement within its leadership, Bloomberg previously reported.
Launched in Los Angeles’ Highland Park neighborhood in 1984. Forever 21 rose to prominence a decade ago as a purveyor of fast-fashion trends for young women.
It soon leaned hard into expansion mode and broadened its focus; moving to sell clothes and other merchandise for a wide variety of shoppers.
The company operates more than 800 stores in the United States, Europe, Asia, and Latin America.
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