Bankrupt Forever 21 in deal to sell for $110.6m

Forever 21 had been in "substantial, round-the-clock negotiations" about the bid.
Forever 21 had been in "substantial, round-the-clock negotiations" about the bid.PHOTO: ST FILE

NEW YORK (BLOOMBERG) - A group that includes two of Forever 21's biggest landlords has offered to buy the bankrupt retailer for US$81 million (S$110.6 million), a fraction of what the international fashion pioneer was once worth.

The consortium of Simon Property Group, Brookfield Property Partners and Authentic Brands Group is seeking to buy substantially all of the company's assets, according to documents filed on Sunday (Feb 2) in federal bankruptcy court.

The so-called stalking horse agreement sets a minimum price for a proposed auction later this month. If no other bidders step forward, the consortium would be declared the winner.

Plans envision an auction process with a sale hearing requested for Feb 4 and approval of the winner no later than Feb 11. The buyers have the right to close and wind down certain stores and conduct going-out-of-business sales, according to the new filing. They are also entitled to a US$4.65 million break-up fee under some circumstances if the sale i is not completed.

Forever 21 had been in "substantial, round-the-clock negotiations" about the bid, the Los Angeles-based company said previously in documents filed last week.

Bloomberg previously reported that Authentic Brands Group and Simon Property Group were mulling over a plan to acquire the retail chain.

Forever 21 was talking about selling a stake to Simon and its other largest landlord, Brookfield Property Partners, before it filed for bankruptcy in September, Bloomberg previously reported. Negotiations broke down and the company had to seek court protection without a reorganization plan in place.

The chain has since struggled to raise money to exit bankruptcy, with potential lenders and buyers baulking because of poor sales and the founding Chang family's insistence on maintaining control.

Forever 21 recently told suppliers in a letter reviewed by Bloomberg that it is short on cash and that it could be forced to liquidate if a buyer does not emerge.