Fast fashion retailer Forever 21 has filed for voluntary chapter 11 bankruptcy protection in the US.
Founded in 1984, Forever 21 has around 800 stores in 57 countries. It expects to have between 450 and 500 stores globally after this process, the BBC has reported.
As part of its restructuring strategy, the company plans to exit most of its international locations in Asia and Europe, but will continue operations in Mexico and Latin America.
Forever 21 has has also obtained $275 (£223m) in financing from its existing lenders JPMorgan Chase Bank, as well as $75m (£60.9m) from TPG Sixth Street Partners. As a result, it intends to operate as usual, honoring all company policies, including gift cards, returns, exchanges, reimbursement and sale purchases. Forever 21 said it will use these funds to “right size” its store base and “return to basics”.
“This was an important and necessary step to secure the future of our Company, which will enable us to reorganize our business and reposition Forever 21,” Linda Chang, executive vice president of Forever 21 said.
Forever 21 closed its Chinese online business in April and only Dublin store last year. In June, it appointed law firm Latham & Watkins and professional services company Alvarez & Marsal as restructuring advisers.
Chapter 11 protection postpones a US company’s obligations to its creditors in financial difficulties for a limited period, to allow it to reorganise its debts or sell parts of the business.
Forever 21 has been contacted for comment. In a letter to customers posted on its website, it said: “This does not mean that we are going out of business – on the contrary, filing for bankruptcy protection is a deliberate and decisive step to put us on a successful track for the future.”