Forever 21 Inc. is preparing for a potential bankruptcy filing as the fashion retailer’s cash dwindles and turnaround options fade, according to people with knowledge of the plans.
The company has been in talks for additional financing and working with a team of advisors to help it restructure its debt, but negotiations with possible lenders have so far stalled, the people said. So focus has shifted toward securing a potential debtor-in-possession loan to take the company into Chapter 11, they said, even as some window remains to strike a last-minute deal that keeps the issue out of court.
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. Representatives for Forever 21 did not respond to a request for comment.
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.