Fast-fashion retailer Forever 21 has filed for Chapter 11 bankruptcy in the US on Sunday. Chapter 11 bankruptcy allows the company to reorganise its debts in attempts to stay in business.
According to the New York Times, the company will shutter 178 stores in the US and upto 350 globally, which includes most of its stores in Asia and Europe. It has 815 stores worldwide. The company said that it will continue operations in Mexico and Latin America. There was no clarity regarding what would happen to their stores in India specifically.
In a press release, the company said that for restructuring, it has received $275 million from JPMorgan Chase Bank and $75 million in new capital from TPG Sixth Street Partners, and certain of its affiliated funds.
“Forever 21 will use these proceedings to right size its store base and return to basics that allowed the Company to thrive and grow into the fast fashion leader,” the company said.
Linda Chang, the Executive Vice President of Forever 21., "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.”
According to Reuters, the company has assets and liabilities in the range of $1 billion to $10 billion, citing court filings.
In a letter to customers, the company wrote that this move does not mean that they are going out of business but was to put them on a successful track to the future.
“As part of our filing, we have requested approval to close a number of stores across the U.S. The decisions as to which domestic stores will be closing are ongoing, pending the outcome of continued conversations with landlords. We do however expect a significant number of these stores will remain open and operate as usual, and we do not expect to exit any major markets in the U.S,” it wrote.
Forever 21 was founded in 1984 in Los Angeles and then grew rapidly banking on inexpensive apparels and fast fashion shopping, updating its styles regularly. It competes with brands such as H&M and Zara.