Bloomberg quoted sources as saying that U.S. real estate giant Simon Property Group Inc. (NYSE: SPG) Simon Real Estate and brand management company Authentic Brands Group LLC (hereinafter referred to as “ABG”) are interested in acquiring the U.S. fast fashion discount company that filed for bankruptcy protection. Retailer Forever 21 Inc.
was founded by Korean-American couple Do Won Chang and Jin Sook Chang. The fast fashion group, founded in 1984, has experienced a surge in debt due to leverage expansion in the past few years, and filed for bankruptcy protection at the end of September 2019. It hopes to exit its business in 40 countries through bankruptcy reorganization, mainly including most of the Asian and European markets. The U.S. market seeks to close up to 178 stores.
In recent weeks, Forever 21 Inc. suppliers have been warned that if the brands they serve cannot obtain immediate financing, they may enter liquidation procedures
With cash flow nearly drying up, Forever 21 Inc. sent a letter to its suppliers requesting purchases on credit. The American fast fashion group hopes to pay only half of the cash for goods delivered by suppliers between January 20 and February 4, and pay within a week after receiving the goods, while the remaining 50% of the payment is in bankruptcy proceedings Payment will be made in the form of super unsecured bonds.
However, Forever 21 Inc. promised suppliers to provide information on potential buyers of the company in the coming weeks.
Simon Real Estate has previously been rumored to be interested in acquiring Forever 21 Inc. David Simon, CEO of the real estate giant, previously stated that he would consider helping some struggling retailers, including by investment to ensure it can continue to operate. The company was previously involved in rescuing teen brand Aeropostale Inc.
As of March 31, 2019, Simon Properties was the sixth largest owner of Forever 21 Inc., excluding department stores. It has provided leases for 99 stores for American brands, with a total area of 1.5 million square feet, but the rent only accounts for 1.4% of Simon Real Estate. Simon Real Estate is reported to be the eighth largest creditor of Forever 21 Inc., and American Fashion Group owes the real estate company US$8.1 million.
According to Forever 21 Inc.’s filing for bankruptcy protection, the company has debts of US$1-10 billion. Linda Chang, the group’s executive vice president and the daughter of founders Do Won Chang and Jin Sook Chang, said in the bankruptcy protection statement that Chapter 11 is intended to simplify the way the company can resume ongoing operations. She admits that expanding from seven to 47 markets in six years has created complexities for the company, at a time when the retail industry is changing significantly, with foot traffic at malls down and sales higher. Many places have turned to online channels.
Neither Forever 21 Inc. nor Simon Real Estate and Brand Management Company ABG commented on transaction rumors.
ABG has emerged in the U.S. retail market in recent years. It holds a large number of poorly managed or bankrupt brands, all of which were acquired at low prices. The brand management company’s most recent transaction was in New York and even the United States. Iconic department store Barneys New York Inc. Barneys New York Department Store, which committed US$271.4 million to a consortium composed of ABG and investment bank B. Riley Financial Inc.
For acquired brands, ABG’s usual approach is to close stores and sell the brand’s original properties, and continue operations through IP licensing. ABG currently owns Juicy Couture, Nine West , Aéropostale and other 50 brand IPs, and is one of the largest players in the global brand licensing field.
Extended reading:
September 29, American fast fashion Giant Forever 21 officially filed for bankruptcy protection, becoming another American fashion retailer that suffered heavy losses.
Forever 21 said that bankruptcy and reorganization will allow the company to focus on its profitable core U.S. business and close other underperforming overseas stores. The company stated in an emailed statement: “We have approved the closure of up to 178 stores in the domestic market in the United States. As for which U.S. stores will be closed in the future, it will depend on the results of negotiations with the owners.”
Forever 21 said it hopes to retain most of its U.S. stores and has no plans to withdraw from the important U.S. market. In addition to the domestic market in the United States, Forever 21 also plans to close most of its stores in Asia and Europe. Last week, the company announced that it would withdraw from the Japanese market and will close all 14 stores in Japan by the end of October.
As early as the end of April this year, Forever 21 announced its complete withdrawal from the Chinese market and closed all offline stores and online channels. As early as 2017, the company closed its six-story flagship store in Causeway Bay, Hong Kong, China. In March this year, Forever 21 withdrew from the Taiwan market.
In addition, Forever 21’s Canadian subsidiary has also filed for bankruptcy and will end its Canadian operations and close all 44 stores in the future, but stores in Mexico and Latin America will continue to operate.
Documents from the Bankruptcy Court of the U.S. District Court for the District of Delaware show that Forever 21’s current assets and liabilities are between US$1 billion and US$10 billion. The company currently has $275 million in financing from existing lenders and has also raised $75 million from TPG Sixth Street Partners and its affiliated funds.
In this transaction, Kirkland & Ellis LLP served as Forever 21’s legal advisor, Alvarez & Marsal served as its bankruptcy and reorganization advisor, and Lazard (Red Group) was its investment bank.
Founded in 1984, Forever 21 currently operates 815 stores in 57 countries and regions around the world, including approximately 600 in the United States. If a brand declares bankruptcy and closes stores significantly, it will inevitably have a huge impact on the income of its store owners.
Forever 21 was founded by Korean-American couple Do Won Chang and Jin Sook Chang. It is headquartered in Los Angeles and was formerly known as Fashion 21. It was originally a store in an area. Clothing store with only 84 square meters. Due to its novel styles and fast introduction of new products, it has been sought after by young consumers. After a period of rapid development, it has now become the fifth largest clothing retailer in the United States, with footprints all over Asia, Europe and the Americas, and its business scope has also expanded from women’s clothing to Men’s clothing, accessories, shoes, plus size clothing and more. The company, which remains privately owned by the founding family, disclosed annual sales of $3.8 billion in 2014 and estimated sales in 2017 at $3.4 billion, according to Forbes.
In June this year, people familiar with the matter revealed that Forever 21 hired a restructuring consultant and was weighing the restructuring plan, hoping to enhance the liquidity of funds and bring a glimmer of hope to the declining business. Turnaround. It is hoped that the company’s operating conditions can be improved by closing stores and taking out loans to avoid filing for bankruptcy protection. Later, as negotiations with potential creditors stalled, Forever 21 began to consider applying for a DIP (Debtor-In-Possession) special loan, hoping that the company could enter bankruptcy protection procedures.
Just before the news of Forever 21’s bankruptcy filing was announced, people familiar with the matter said that the company’s bankruptcy reorganization plan negotiations had once again reached an impasse – Forever 21 hopes to retain the company’s co-founders On the premise that Zhang Dongwen has controlling equity, he exchanges part of his equity for the support of the group’s store owners. But the owners, led by U.S. commercial real estate giant Simon Property Group Inc. and commercial real estate firm Brookfield Property Partners LP, did not accept their offer. This means that Forever 21 will not have any ready-made restructuring plan when it files for bankruptcy protection in court. This will not only prolong the company’s business restructuring time, but also make the restructuring process more complicated.
Due to the poor overall retail environment, many retailers in the United States have fallen into bankruptcy. A report released by data research company Coresight Research on September 27 shows that so far, 8,567 retail stores have closed in the United States this year.
Since 2017, more than 20 U.S. retailers have declared bankruptcy, including department store Sears, as consumers shifted to online shopping, leading to a decline in mall traffic. Holdings Corp, toy retailer Toys ‘R’ Us (Toys “R” Us) and others. Credit Suisse predicted in 2017 that by 2022, 220 to 275 shopping malls in the United States will close, accounting for 20% to 25% of the total. </p
