A US bankruptcy judge has said he would approve a deal for young fashion giant Forever 21 to be sold to two of its largest landlords and the Authentic Brands Group, in a deal that ends the control of its founders, the Chang family.
The business, which applied for Chapter 11 bankruptcy protection last September, has been sold for $81 million in cash, which also includes $53 million in merchandise not yet paid for. Simon Property Group and Brookfield Property Partners, along with Authentic Brands Group, will also assume certain liabilities of the chain.
It is believed that another buyer had been attempting to purchase the chain but had failed to raise the cash in time for an auction that was due to be held on Monday, but abandoned as only one bid was on the table The company’s advisers said a quick deal was necessary to due a rapid decline in cash.
The deal approved by judges preserves 25,000 jobs, however the new owners will have the right to close stores and the company had operated around 800 worldwide. It is not yet clear how many are set to remain open. UK stores in London, Liverpool and Birmingham were slated for closure last year.
Forever 21 was founded by the Chang family, Korean immigrants to the US, in 1984 and rode the global fast fashion wave. But in recent years its styles fell out of favour with consumers and the business was particular vulnerable due to its large footprint in shopping centres, particularly in the US, which had experienced rapidly falling footfall.
Before the sale the Changs had expressed hope that they could retain control of the business, which is is said to have spooked some potential buyers.
This is the second time in a matter of months that brand house Authentic Brands Group has acquired a retail brand. In October it acquired stricken upscale department store Barneys and plans to license the brand and sell it via its former rival store Saks Fifth Avenue, among others.
While its unusual for fashion landlords to buy a retailer, Simon Property Group and the predecessor of Brookfield partnered with Authentic to acquire bankrupt Aeropostale Inc. in 2016.