Bankruptcy Sale
Forever 21 gets $ 81 million stalkinghorse bid from ABG, landlords.
Forever 21 has signaled it is ready for sale. The fast-fashion retailer told a Delaware bankruptcy court that it has an $81.1 million stalking-horse bid from a group made up of licensing company Authentic Brands Group and landlords Simon Property Group and Brookfield.
The group has teamed up to form an entity called SPARC Group F21 that will act as the default bid to buy the retailer, according to a filing in the case on
Sunday. The group has already deposited $13.5 million.
A hearing to formalize the development is scheduled to take place Tuesday in Delaware bankruptcy court. If there are competing bids to the stalking horse bid, an auction would take place by Feb. 12, and the court would have to issue a sale order within roughly a week after that.
“Forever 21 filed a motion with the bankruptcy court seeking approval to sell the Forever 21 business to a new owner,” the company. “Once approved the agreement will allow Forever 21 to come out of bankruptcy, keeping its headquarters, stores and E-commerce operations open, providing fashions and trends that customers know and love for years to come.”
A representative for Brookfield declined to comment Monday. Representative for Simon and Authentic could not be reached for comment.
The consortium’s bid envisions purchasing Forever 21’s inventory, furnishings, the leases it has retained, web sites and domain names, among other assets.
Experts pointed to the low bid as something of a repudiation of Forever 21’s fast-fashion business model, one plagued by trademark infringement lawsuits. One of the provisions in the stalking-horse agreement, for instance, asks the company to “remove all allegedly infringing merchandise and violative merchandise from stores and distribution centers” as a condition of the deal, if it goes through.
“Going forward, the people considering purchasing Forever 21 are saying that this business model is not sustainable,” said Jeff Trexler, associate director of the Fashion Law Institute at Fordham
University, commenting generally on the deal. “If it’s not a total repudiation, it’s a stern warning or a spanking.”
Forever 21 entered its Chapter 11 proceedings in September with an international presence across 43 countries, including 549 stores in the U.S. It has closed some 102 U.S. stores in the roughly four months since, significantly fewer than the 178 stores it had projected closing in the U.S. at the time.
Overall, it was leasing 12.2 million square feet of space from multiple landlords, logging $450 million in annual costs for its stores, according to court records.
Last week, the retailer indicated to the court that it was nearing some kind of arrangement for its planned restructuring, highlighting its considerable ongoing operations including some 22,000 employees and nearly 450 stores in the U.S.
“The debtors have run an extensive and near- continuous marketing process since summer 2019,” Forever 21’s chief restructuring officer Jonathan Goulding, who is a managing director at professional services firm Alvarez & Marsal, said in a filing in January.
ABG, which in November purchased the assets of fallen luxury department store Barneys New York Inc. for $271.4 million, also holds fashion brands such as Vince Camuto, Nine West and Juicy Couture in its portfolio. For Barneys New York, the sale has meant liquidation sales at its remaining stores, and a reincarnation of sorts within Saks Fifth Avenue, through a licensing arrangement with ABG.