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Forever 21 Bankruptcy Filing Could be Just Weeks Away

A Forever 21 bankruptcy filing could come in just a few weeks.

The financially-pressured teen fast-fashion chain is said to have selected Prime Clerk as its claims agent. Just last week, Forever 21 was said to have begun talks with possible lenders to provide it with debtor-in-possession (DIP) financing to fund operations once it enters bankruptcy court protection. Prime Clerk did not return a request for comment.

Philip Emma, a retail restructuring analyst at Debtwire, told Sourcing Journal, “Usually the selection of a claims agent is one of the last boxes you check before you file for bankruptcy.”

Claims agents handle the aggregation of claims from suppliers, whether vendors or other service providers. According to Emma, once the word gets out that a claims agent has been hired, the filing is usually close at hand. That’s because suppliers typically pull back on shipping inventory.

“The challenge for retailers at this part of the year is that they are still setting up orders for the holiday period. You want to get the [bankruptcy] filing out of the way so you still have time to get new shipments in to get inventory for the holidays,” the analyst said.

Debtwire first reported on Forever 21’s selection of Prime Clerk as a claims agent. It couldn’t be determined whether a DIP lender has been selected yet.

There have been rumblings about a possible bankruptcy filing by Forever 21 since June, but now the cash crunch appears to be getting worse. Cash flow issues have dogged the teen fashion chain for years. The company has high overhead costs connected to rents on leases for its stores, many of which are classified as super-sized boxes.