Forever 21's US Operator Wins Court Approval to Liquidate
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The repayment plan includes a settlement with lenders and former Forever 21 parent Sparc Group that's designed to boost recoveries for unsecured creditors that stood to get pennies on the dollar. Sparc agreed to fully waive a $323 million claim that would have diluted any amounts received by unsecured creditors. They will get 70% of any net proceeds that F21 OpCo obtains during liquidation.
The deal approved Tuesday by Judge Mary Walrath is part of the firm's liquidation. An earlier version without the settlement called for unsecured creditors receiving less than 1 cent on the dollar for debt they're owed.
F21 OpCo filed for Chapter 11 protection in March, two months after Sparc — which operated Forever 21 along with Aeropostale and other fashion brands — announced it had merged with JCPenney to form a new company.
A committee representing unsecured creditors in bankruptcy said it investigated the Sparc transaction. In a June 11 court filing, the group said it opted for the settlement approved Tuesday because it didn't uncover potential legal claims that would 'materially improve recoveries for general unsecured creditors.'
Some vendors to F21 OpCo told Bloomberg News that the firm had asked for discounts on orders and took delivery of shipments shortly before filing for bankruptcy, without disclosing plans to reorganize.
Founded in 1984, Forever 21 offered young women low-cost, trendy clothing but has suffered from rising costs and competition from online retailers like Temu and Shein. The Forever 21 brand is owned by brand licenser Authentic Brands Group and is not part of the Chapter 11 case.
The case is F21 OpCo LLC, number 25-10469, in the US Bankruptcy Court for the District of Delaware.
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