Forever 21 Reportedly Close To Bankruptcy Filing

Specialty retailer Forever 21 was founded in 1984 by a Korean couple who wanted to bring Korean-themed fashion items to the U.S. market.

The chain is reportedly close to filing for bankruptcy, Bloomberg reported Wednesday.

What Happened

Forever 21 evolved from one store in Los Angeles to its current footprint of more than 800 stores worldwide, according to Bloomberg.

The company has large exposure to malls and has suffered from a combination of declining foot traffic and competition from online rivals.

The company needed to raise cash in early August and was in talks with potential lenders. After a few weeks of talks, it now appears Forever 21's efforts are falling short, Bloomberg said. 

The options on the table include a potential debtor-in-possession loan as part of a Chapter 11 bankruptcy filing.

If the company succeeds in pursuing a Chapter 11 bankruptcy, the company would be in a better position to recapitalize the business and close underperforming stores, a source told Bloomberg.

Why It's Important

Forever 21 is privately owned, but a potential bankruptcy has ramifications for public REITs, CNBC reported.

The retailer ranks as Simon Property Group Inc SPG's seventh-largest tenant in terms of rent paid.

Simon Property CEO David Simon said in July he would evaluate infusing cash into troubled retailers in its malls, but did not mention any companies by name, CNBC said. 

Forever 21 could reach a last-minute financing deal that may keep it out of the courts, but there is no guarantee this will be the final outcome, according to Bloomberg. 

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Photo by Hans Olav Lien via Wikimedia.