Mall owners seek to buy Forever 21 from bankruptcy
WILMINGTON ““ Two of the largest U.S. mall owners have submitted a bid to acquire Forever 21, a clothing retailer known for its trendy offerings and low prices, according to court filings.
Simon Property Group and Brookfield Property Partners, along with brand management company Atlantic Brands Group, have submitted a so-called stalking horse bid of $81.1 million for the beleaguered Forever 21, according to a purchase plan filed in U.S. Bankruptcy Court in Wilmington on Feb. 2. The coalition of buyers formed an affiliate, Sparc Group F21 LLC, in filing the plan that sets the minimum sale price for the retailer.
Under the terms of the bid, the buyers can close certain stores and conduct going-out-of-business sales. If the sale doesn’t proceed, they may also be entitled to a $4.65 million break-up fee under some circumstances.
Los Angeles-based Forever 21 filed for Chapter 11 bankruptcy protection in September, releasing a list of 178 stores it would close in the U.S. and announcing that it was leaving operations entirely in 40 countries, including Canada and Japan.
“This was an important and necessary step to secure the future of our company, which will enable us to reorganize our business and reposition Forever 21,” said Linda Chang, executive vice president of Forever 21, in a statement announcing the Chapter 11 filing.
Delaware has three Forever 21 locations, one each at the Christiana Mall, Dover Mall and Rehoboth Beach’s Tanger Outlets. The latter was included on a list of the 178 locations that the company could close, although it noted that those decisions were subject to lease or rent negotiations.
Forever 21, which targeted women ages 25 to 40 with its clothing and accessories, hit trouble in recent years after it expanded storefronts aggressively as e-commerce began to grow as a disrupting factor. With frequently changing merchandise, the company depended on customers returning often to buy items primarily costing $50 or less.
E-commerce made up only 16% of its sales, as of last year, according to officials. The company saw its revenue drop by about 25% to $3.3 billion in 2018, down from $4.4 billion in 2016. It expects the restructured company to bring in $2.5 billion in annual sales.
The company was able to stay afloat through its bankruptcy case via $275 in financing from JPMorgan Chase Bank, as well as a $75 million capital influx from TPG Sixth Street Partners. It has said in recent reports that it is running low on cash, however, and may be forced to liquidate if a buyer isn’t found soon.
The $81.1 million bid will be declared the winner unless another bid comes in. If so, an auction will be held on Feb. 10 with a winner declared by Feb. 11, according to court filings.
Simon and Brookfield are among the mall owners with the most at stake in Forever 21, with their malls featuring 99 and 85 stores, respectively. It’s not their first time attempting to rescue a major tenant as the two teamed up in 2016 to rescue teen apparel retailer Aeropostale in its bankruptcy case.
By Jacob Owens