(Bloomberg)—Forever 21 Inc. is preparing to close at least 100 stores as part of a restructuring that calls for the trendy retailer to file for bankruptcy as early as this month, according to people with knowledge of the preparations.
The apparel merchant is working on obtaining a financial package that would provide about $75 million for its restructuring in the court process, said the people, who asked not to be named discussing private negotiations.
The plan envisions a Chapter 11 filing, which would allow the company to keep operating while it works out a way to pay its creditors and turn the business around. Even as these plans firm up, advisers could still strike an agreement that buys the retailer more time before resorting to bankruptcy, the people said.
Founded in 1984, Forever 21 operates more than 800 stores in the U.S., Europe, Asia and Latin America.
Representatives for Los Angeles-based Forever 21 didn’t comment on the preparations, but referred to a statement it released Wednesday in response to a Wall Street Journal report that the retailer was planning to file for bankruptcy as early as Sunday.
“Forever 21 is not planning to file for bankruptcy on Sunday,” the statement read. “Our stores are open and it is our intention to continue to operate the vast majority of U.S. stores, as well as a smaller amount of international stores, providing customers with great service and the curated assortment of merchandise that they love and expect from Forever 21.”
Bankruptcy protection would help the bargain apparel firm shed unprofitable stores after expanding too far and too fast in recent years, the people said.
It could also stress major mall owners, including Simon Property Group Inc. and Brookfield Property Partners LP. Forever 21 is one of the biggest mall tenants still standing after a wave of bankruptcies in the retail sector that has seen more than 8,200 outlets close this year.
The landlords may consider unusual means to preserve Forever 21’s survival, people with knowledge of the developments said last month. Mall owners and company representatives have discussed easing Forever 21’s rent in exchange for an interest in the retailer.
Bloomberg first reported last month that Forever 21 was preparing for a potential bankruptcy filing.
To contact the editors responsible for this story: Rick Green at [email protected]
© 2019 Bloomberg L.P.