Forever 21 in Talks with Simon Property & Authentic Brands for Possible Buyout

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Forever 21, the troubled teen apparel retailer which filed for bankruptcy, is in talks with a pair of big players which may consider teaming up to purchase and manage the chain. Photo Credit: Shutterstock

By Hadassa Kalatizadeh

Forever 21, the troubled teen apparel retailer which filed for bankruptcy, is in talks with a pair of big players which may consider teaming up to purchase and manage the chain. Crain’s NY reported, Simon Property Group, the mall owner, and Authentic Brands Group, the New York City-based brand management conglomerate are talking privately about pairing up to save the retailer before it runs out of time and funds. Based on a source who wished to remain unnamed, the bid to buy Forever 21’s stores and brand is still in fragile stages and may or may not come to fruition.

Forever 21, based in the Los Angeles, was founded in 1984 and in 2014 was operating roughly 620 stores. As part of its bankruptcy in September, it had announced it would cease operations in 40 countries and close most of its international stores and 178 of its US stores to focus on its profitable Latin America and US stores. Before Forever 21 went bankrupt, Simon Group, which is one of retailer’s largest landlords, had mulled over purchasing a stake in the company together with Brookfield Property Partners, another of its large landlords. Bloomberg had reported that the talks lost traction, and Forever 21 was forced to file for court protection without securing any sort of reorganization plan. The brand has been struggled since, with potential lenders and buyers hesitating due to lackluster sales. The insistence of the founding Chang family to keep control of the company has also become an obstacle in sealing a deal.

In the last few weeks, the situation has deteriorated, with Forever 21 admitting that it is so strapped for cash that if it does not find a way to raise capital in a sale or loan, it will be forced to liquidate. In a letter, the chain asked suppliers for inventory on credit while it tries to carry on talks with a prospective buyer, which it did not name. In the letter, obtained by Bloomberg, the company said that it was unable to obtain a loan, and “therefore is turning to you in an effort to continue operating”. The letter, which seems to be an effort to thwart liquidation, says Forever 21 expects to give information about the potential buyer in the upcoming weeks.

Forever 21 is asking to pay the suppliers half of their balance owed for goods delivered between Jan. 20 and Feb. 4 in the form of cash payment the week after it would receive the shipment. The other half of the balance owed, it proposed should be considered an unsecured “superpriority” administrative claim in the company’s bankruptcy proceedings, ranked after Forever 21’s lenders for repayment. Any arrangement made with the suppliers would require the approval of the judge overseeing the bankruptcy case.

Simon Group and Forever 21 did not respond to requests for comment, and Authentic Brands declined to comment.

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