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Forever 21 weighs bankruptcy petition



Pedestrians pass a Forever 21 store in New York.

Scott Mlyn | CNBC

Apparel retailer Forever 21 is considering submitting a bankruptcy petition to restructure its debt, a person familiar with the situation told CNBC earlier CNBC reported on its business. These efforts, however, have stalled and make bankruptcy more likely.

It could not be determined at once whether the company had begun to take out a so-called debtor-in-possession loan that would finance a possible bankruptcy, and that it is still able to to avoid a registration. Bloomberg reported for the first time on a possible bankruptcy.

Many of the most affected retailers, such as Forever 21

, are in shopping malls where fewer shoppers spend their money. With sales down, companies are still burdened by large, expensive stores, even though retailers have to invest in technology to defend themselves against the competition from new online-born brands like Lulus.

with more than 815 stores worldwide. Bankruptcies are a tool that allows retailers to get out of unwanted leases. Retailers like Barneys and Mattress Firm have requested protection to reduce their footprint.

Should a bankruptcy take place, Forever 21 is likely to emerge with a narrower fleet of deals. However, closures are likely to put pressure on the owners of the shopping centers who rent these space, including Simon Property Group and Brookfield Property Partners.

With 99 stores in Simon's portfolio, Forever 21 is the seventh largest in-line tenant in terms of rent received by landlords. CEO David Simon told analysts in July that he would consider adding more capital to distressed retailers, without naming them, to ensure that deals remain open. Simon helped dismiss the teenage clothing retailer Aeropostale from bankruptcy about three years ago.

Forever 21, Simon and Brookfield did not immediately respond to CNBC's request for comment.


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