Forever 21 Inc., a teenage fashion company, has filed for bankruptcy protection after mounting debt pressure.
The Court papers filed in the Bankruptcy Court for the District of Delaware show Forever 21 has estimated liabilities on a consolidated basis of between $1 billion and $10 billion. The Chapter 11 filing allows the Los Angeles-based company to keep operating while it works out a plan to pay its creditors and turn around the business.
Forever 21 has been a hot destination for teen shoppers that fell victim to its own rapid expansion, rising rentals and changing consumer tastes. Forever 21 has obtained $275 million in financing from lenders with JPMorgan, Chase & Co. as agent, as well as $75 million in new capital from TPG Sixth Street Partners and its affiliated funds.
“The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the U.S. and abroad to revitalize our brand and fuel our growth, " Linda Chang, executive vice president of Forever 21, said in a statement.
Forever 21 was born in 1984 and along with other so-called fast fashion chains like H&M and Zara, rode a wave of popularity among young customers that took off in the mid-1990s. Their popularity grew during when shoppers sought fashion bargains. But over the last many years, fast fashion has fallen out of style.