Forever 21 Inc.’s bankrupt US retail operator is proposing that lenders get little — if anything — owned to them under a reorganisation plan.
The projected recovery for asset-based loan lenders, which have made $1.09 billion of allowed claims, would be 2.36 percent to 3.01 percent, according to court papers dated Friday. Those creditors would receive 94 percent to 97 percent of the bankruptcy case’s net proceeds, with unsecured creditors receiving the rest. They have $433 million of allowed claims.
Recoveries are proposed to be zero for term- and subordinated-loan lenders, which combined have $497 million of allowed claims. But they would receive releases, which generally means lenders would be free from any future claims or actions from debtors.
Meanwhile, Friday’s filing also stated that a deal has been reached with former Forever 21 owner SPARC Group regarding approximately $338 million that SPARC has alleged it is owed by the chain’s current operator. The agreement calls for SPARC, which combined with JCPenney several months ago to form Catalyst Brands, to waive recovery on 75 percent of that amount.
Forever 21, a fashion brand targeting young women founded in 1984, is closing its US stores as part of its second trip to bankruptcy. The latest Chapter 11 filing capped years of underperformance amid competition with online purveyors like Shein.
By Dorothy Ma
Learn more:
The Debrief | Is Forever 21 Shein’s Biggest Victim Yet?
Retail editor Cathaleen Chen joins Brian Baskin and Sheena Butler-Young to discuss the fall of Forever 21, the future of fast fashion, and why affordability alone isn’t enough to win consumers.
