💥New Chapter 11 Bankruptcy Filing - F21 OpCo, LLC (Forever 21)💥
Proving nothing truly is forever, the once-popular fast-fashion retailer is liquidating.
On March 16, 2025, F21 OpCo, LLC and two affiliates (collectively, the “debtors”) filed chapter 22 bankruptcy cases in the District of Delaware (Judge Walrath x 2). Y’all know these debtors as the 41-year-old, 5.5-years-out-of-bankruptcy Forever 21, the fast fashion brand with a “fiercely loyal customer base” that’s been out of fashion for as long as we can remember.
Good lord, what’s the count on 22s these days? Oh yeah, the past half-year has given us …
For those that missed the September ‘19 bankruptcy coverage …
… it culminated in a February ‘20 363 sale to a joint venture formed between the then-debtors’ largest landlords, Simon Property Group (“Simon”) and Brookfield Property Partners (“Brookfield”), on the one hand, and Authentic Brands Group (“ABG”), on the other, for a headline $81.1mm, followed by Judge Walrath denying approval of the debtors’ disclosure statement in July ‘21 and dismissing the cases in February ‘22 (all but one debtor) and February ‘23 (the last debtor) because they couldn’t pay their admin creditors in full nor strong-arm them into accepting less.
A year after the sale closed, in February ‘21, Brookfield flipped its interest over to SPARC Group Holdings LLC (“SPARC”), an entity owned primarily by Simon and ABG and which owns “well-known,” “successful,” and bankrupt-as-sh*t brands like Aéropostale (“Aero”) (filed May ‘16), Brooks Brothers (filed July ‘20), Eddie Bauer (filed June ‘09), Nautica (filed February ‘12), and Lucky Brands (filed July ‘20). Now that’s one steaming pile of garbage. You have to wonder if there’s some competition going on between SPARC and Hilco Global to collect as many bankruptcy relics as possible.
Back on topic, after the February ‘20 sale, the debtors started participating in a cash pooling system centered at SPARC Group LLC, the entity that houses Aero’s operations. Under the system, all cash generated by the debtors got swept into an Aero-maintained account, which … 🥁*drum roll please* 🥁 … gives us our first material claim. You see, Aero would draw and disburse funds to whichever pooling party needed it, and brother, did these debtors need a lot. Like way more than they ever put in. After netting $400mm in losses over the last 3 fiscal years — $150mm in FY24 alone — the debtors owe Aero about $320mm as of the petition date.
But, of course, there’s more debt than that. On December 19, 2024, JCPenney (“JCP”), the also-formerly-bankrupt dead department store anchoring a bunch of dead malls “iconic American shopping destination offering a broad portfolio of fashion, apparel, home, beauty, and jewelry from national and private brands,” acquired parentco SPARC, which resulted in the creation of Catalyst Brands, now home to the debtors and those other “brands” ☝️. After the closing, Catalyst Brands wasted no time announcing that it was already exploring “strategic options” for the debtors while simultaneously refinancing the debtors’ prior ABL and term loan facilities (the amounts of which were undisclosed) and obligating them on JCP’s absolutely monstrous loans. These ones:
~$1.6 billion, y’all! And that was like 4 months ago! At least the unsecured creditors' committee will have something to do whenever it shows up. Thankfully, that’s all the debt; there’s no DIP in the cases, and instead, the debtors are living off of cash collateral.
Okay, enough history. Do you even need to guess what fate bankruptcy holds for the debtors?
Do you even need to guess what caused the filing?
Yes, it was COVID. And …
… yes, it was inflation. Annd …
… yes, it was decreased consumer spending. Annnd …
… yes, it was contracting margins. Annnnd …
… yes, it was supply chain interruptions. Annnnnd …
… yes, it was inventory and employee costs.
Just. The. Usual.
To try to keep readers’ eyes from glazing over (which, for the record, didn’t work), the debtors also chuck blame on the “de minimis exception,” which is — as we discussed here — a trade policy that exempts goods valued under $800 from import duties and tariffs. Hmm … fast fashion. $800 limit. Seems like there’d be a lot of opportunity for foreign vendors — maybe the debtors’ own** — to undercut the debtors and “pass significant savings onto consumers.” But that’d never happen with the debtors’ “fiercely loyal customer base,” right? LOL, JK, that’s exactly what happened. They got crushed by the likes of Temu and Shein, even partnering with the latter in ‘23 to stop the bleed, but no dice, losses continued.
With the writing on the wall, the debtors commenced an informal sale process in the summer of ‘24 and “explored all available strategic alternatives.” Wait, is guaranteeing ~$1.6b in new-to-you debt in the months leading up to bankruptcy now a “strategic alternative”?! In January ‘25, they brought on independent managers Paul Aronzon and Scott Vogel too, who also considered their options and, instead of finding more debt to guarantee, decided the best course of action was burning down the stores. That started on February 14, 2025 and encompassed all locations by February 28, 2025, but don’t worry, the debtors are totes going to market the husk that’s left of their business during chapter 11. Phew!
While that’s going on, they intend to prosecute a chapter 11 plan of liquidation that carries the support of their secured lenders, which will distribute proceeds in accordance with priority “subject to agreements reached with the Debtors’ largest stakeholders.” Those agreements could net “as much as 6% of distributable proceeds” for GUCs, provided they accept the plan. Otherwise, it’s 3%, and regardless, the case timeline looks like this:
The debtors are looking to get a draft of that plan on the docket by March 28, 2025, but based on the term sheet, we’re not expecting anything special. The first day hearing took place on March 18, 2025, at which the court granted all the debtors’ first day relief and scheduled a second day hearing for April 15, 2025. We’ll once again close out by wishing the best to the debtors’ ~9.3k employees.
The debtors are represented by Young Conaway Stargatt & Taylor, LLP (Andrew Magaziner, Robert Poppiti, Jr., Ashley Jacobs, S. Alexander Faris, Kristin McElroy, Andrew Lee, Sarah Gawrysiak), as legal counsel, Paul, Weiss, Rifkind, Wharton & Garrison LLP (Brian Hermann, John Weber, Joe Graham, Sarah Harnett) as special corporate and finance counsel, Berkeley Research Group, LLC (Stephen Coulombe) as CRO and financial advisor, SSG Capital Advisors, LLC (J. Scott Victor, Matthew Arden, Patrick Swanick, Samuel Charlton) as investment banker, Hilco Merchant Resources, LLC (“Hilco”), Gordon Brothers Retail Partners, LLC, and SB360 Capital Partners, LLC as store closing advisors, and Retail Consulting Services, Inc. d/b/a RCS Real Estate Advisors as lease portfolio advisor. Paul Aronzon and Scott Vogel are the debtors’ independent managers. Wells Fargo Bank, N.A. ($WFC), as prepetition ABL agent, is represented by Otterbourg, P.C. (Daniel Fiorillo, Chad Simon, Antonio Aguilera) and Richards, Layton & Finger, P.A. (John Knight, Amanda Steele, Colin Meehan) as legal counsel. Pathlight Capital LP, as prepetition term loan agent, is represented by Riemer & Braunstein LLP (Steven Fox, Paul Bekker) and Ashby & Geddes, P.A. (Gregory Taylor) as legal counsel. Simon Blackjack Consolidated Holdings, LLC, as prepetition subordinated loan agent, is represented by Choate, Hall & Stewart LLP (M. Hampton Foushee, Alexandra Thomas) and Pashman Stein Walder Hayden, P.C. (Joseph Barsalona II, Alexis Gambale) as legal counsel. Hilco is represented by Ropes & Gray LLP (Gregg Galardi, Stephen Iacovo, Christopher Pavlovich) as legal counsel.
*In addition to this one, we got JOANN, Party City, PetroQuest, American Tire Distributors, Tarrant County, and White Forest Resources, Inc.
**The debtors’ foreign manufacturers are predominantly located in China, Hong Kong, and “Korea” – the debtors didn’t specify which, and the PETITION team is really hoping it’s the “South” variety.
Company Professionals:
Legal: Young Conaway Stargatt & Taylor, LLP (Andrew Magaziner, Robert Poppiti, Jr., Ashley Jacobs, S. Alexander Faris, Kristin McElroy, Andrew Lee, Sarah Gawrysiak)
Special Corporate and Finance Counsel: Paul, Weiss, Rifkind, Wharton & Garrison LLP (Brian Hermann, John Weber, Joe Graham, Sarah Harnett)
Independent Managers: Paul Aronzon and Scott Vogel
Financial Advisor/CRO: Berkeley Research Group, LLC (Stephen Coulombe)
Investment Banker: SSG Capital Advisors, LLC (J. Scott Victor, Matthew Arden, Patrick Swanick, Samuel Charlton)
Store Closing Advisors: Hilco Merchant Resources, LLC, Gordon Brothers Retail Partners, LLC, and SB360 Capital Partners, LLC
Lease Portfolio Advisor: Retail Consulting Services, Inc. d/b/a RCS Real Estate Advisors
Claims Agent: Verita (Click here for free docket access)
Other Parties in Interest:
Prepetition ABL Agent: Wells Fargo Bank, N.A.
Legal: Otterbourg, P.C. (Daniel Fiorillo, Chad Simon, Antonio Aguilera) and Richards, Layton & Finger, P.A. (John Knight, Amanda Steele, Colin Meehan)
Prepetition Term Loan Agent: Pathlight Capital LP
Legal: Riemer & Braunstein LLP (Steven Fox, Paul Bekker) and Ashby & Geddes, P.A. (Gregory Taylor)
Prepetition Subordinated Loan Agent: Simon Blackjack Consolidated Holdings, LLC
Legal: Choate, Hall & Stewart LLP (M. Hampton Foushee, Alexandra Thomas) and Pashman Stein Walder Hayden, P.C. (Joseph Barsalona II, Alexis Gambale)
Store Closing Advisor: Hilco Merchant Resources, LLC
Legal: Ropes & Gray LLP (Gregg Galardi, Stephen Iacovo, Christopher Pavlovich)