FASHION chain Forever 21 is in discussions to give a stake in the company to its two largest landlords as part of a restructuring that would allow co-founder Do Won Chang to retain a share, according to people familiar with the matter.
The ailing fast-fashion retailer is in talks with US shopping mall owners Simon Property Group and Brookfield Property Partners about the proposal, which would be part of a US bankruptcy filing, sources said. Negotiations are ongoing, and could end without a deal, they said.
Los Angeles-based Forever 21 is preparing to file for bankruptcy as soon as this month, ideally with a restructuring plan in place, the sources said. Company advisers have been working on obtaining a bankruptcy loan package that would give the retailer about $75m (€68m) to continue operations, reports claimed.
A spokeswoman for Brookfield declined to comment, and Simon and Forever 21 did not respond to requests for comment.
The retailer's fate has become increasingly important to mall owners, who have seen former stalwarts including Payless and Gymboree close more than 8,500 stores this year, according to firm Coresight Research Inc. That has left Forever 21 as one of the largest remaining occupants, with more than 800 stores globally.
At the same time, the retailer is dependent on its landlords, which could play a crucial role as it looks to slim down operations and revive its best locations. The restructuring plan could include considerations from the landlords in exchange for a stake in Forever 21, sources said.
Simon and General Growth Properties, now part of Brookfield, teamed up to buy most of bankrupt teen clothing chain Aeropostale three years ago. They have since sat on the sidelines as retailers liquidated, but Simon has publicly said it is open to doing similar-type deals going forward.
On a July 31 conference call with investors to discuss second-quarter earnings, Simon Property group chief executive David Simon said his firm was well-positioned to invest in distressed tenants.
"We certainly have the ability to help beyond what you might do on the leases and become an investor in a distressed situation," he said. "So we have kind of the ability... to look at becoming more than just a real estate player, but a buyer of these brands." (Bloomberg)