Report Says Forever 21 Holding Debtor-in-Possession Talks
For months, the fashion industry has been talking about Forever 21 being in financial difficulties after it started shutting down all its stores in China and selling its giant headquarters building east of downtown Los Angeles.
Now, a report by Bloomberg News said the fast-fashion retailer is having cash-flow problems and is in talks with potential lenders and restructuring advisers.
“This has been going on for three months,” said one Los Angeles source who recently met with company executives about their business. “They want to take on a partner. They need the dough because they have this debt.”
In a June 3 article, Bloomberg News said the company is looking for financing to help with liquidity and to make sure that co-founder Don (Do Won) Chang keeps control of the company.
The financial news service went on to say that Forever 21 has spoken with Apollo Global Management about lining up potential debtor-in-possession financing for the company, which in 2017 had a reported $3.5 billion in revenues.
In an email, Forever 21's public-relations department said the mammoth retail chain was "speaking to its lenders in the normal course of business and is in compliance with all of its agreements and continues to operate as usual."
Gary Wassner, chief executive of Hilldun Corp., a factor and financial corporation based in New York, said his company continues to approve Forever 21’s credit with vendors, but its credit lines are extremely limited. “We are reassessing them now,” he said in an email.
In February, Forever 21 sold its L.A. headquarters building, which encompasses 2.1 million square feet, for just under $166 million to the Blackstone Group. In 2010, Forever 21 bought the structure at 3880 N. Mission Road from Macy’s for $38 million.
Forever 21, which continues to operate out of the headquarters building it sold a few months ago, was founded in 1984 by Don Chang and his wife, Jin Sook Chang. They launched their first store in the Los Angeles suburb of Highland Park, later aggressively expanding to shopping centers across the country. They dreamed of converting their smaller, mall-based stores into all-encompassing emporiums.
Over the years, the retail chain’s stores grew in size. By 2010, it had opened a major 88,000-square-foot flagship store in the Los Cerritos Center shopping mall in Cerritos, Calif. The emporium had 86 fitting rooms, 24 cash registers and a staff of 263 employees.
In recent years, it launched outposts in major Chinese cities including Tianjin, Hangzhou, Beijing, Chongqing and Hong Kong, but it started shuttering those locations a few years ago.
In April, the company confirmed it was closing all of its Chinese stores after eight years of business in that country.