Uh oh, looks like Forever 21 Inc., one of our favourite clothing chains, might be in trouble! According to a report by Bloomberg, the clothing chain has been having financial problems and could potentially file for bankruptcy. The report mentioned that the retailer’s cash supply has been dwindling fast and their turnaround options are fading, sources close to the company said.
Previously, the fashion retailer had tried to restructure its debt with the help of a team of advisers but negotiations have been stalled. With no other choice, they are now thinking of securing a potential debtor-in-possession loan to take the company into Chapter 11 in USA.
FYI, Investopedia states that Chapter 11 is a “form of bankruptcy that involves a reorganisation of a debtor’s business affairs, debts, and assets.” This bankruptcy actually gives debtors a fresh start, especially if they need time to restructure their debts.
However, the clothing chain is still hoping that they can come to an agreement on a last-minute deal that will prevent them from declaring bankruptcy. Anonymous sources told Bloomberg that the bankruptcy filing would help Forever 21 continue their business and eliminate any unprofitable stores.
One of the issues is also that Forever 21’s co-founder, Do Won Chang, has insisted on maintaining a controlling stake in the company, making it more difficult for them to raise funds. The retailer currently has more than 800 stores in the U.S., Europe, Asia, and Latin America but these stores could be at risk of shutting down if no deal is reached. It is unclear whether any stores in Malaysia will be affected by this.
Hopefully, this popular clothing chain will be able to overcome their financial difficulties!
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