Forever 21’s Second Chapter 11 Filing: Key Developments and Outlook

On March 16, 2025, F21 OpCo, LLC filed for chapter 11 protection in the U.S. Bankruptcy Court for the District of Delaware (Case No. 25-10469, Judge Mary F. Walrath), initiating the complete liquidation of Forever 21's U.S. retail operations. This Chapter 22 filing—the company's second bankruptcy in six years—resulted in the closure of all 354 U.S. stores. Unlike the 2019 case that preserved Forever 21 as a going concern, no buyer emerged. The plan was confirmed on June 24, 2025, with an effective date of June 30, 2025—a 106-day timeline from petition to emergence.

The Debtors explicitly blamed their failure on foreign e-commerce competition. Co-Chief Restructuring Officer Stephen Coulombe stated that Forever 21 was "materially and negatively impacted" by Shein and Temu's exploitation of the de minimis tariff exemption—a trade loophole that allowed these competitors to ship goods under $800 directly to American consumers duty-free. Forever 21's international licensees continue operating stores outside the United States, and Authentic Brands Group retains ownership of the intellectual property, but the domestic retail footprint is gone.

Founding and Growth

Do Won and Jin Sook Chang, married immigrants from South Korea, opened a 900-square-foot store called Fashion 21 in Los Angeles on April 16, 1984. They funded the venture with $11,000 in savings.

The Changs rebranded to Forever 21 in 1987 to broaden the store's appeal beyond the Korean-American community. Two years later, they opened their first mall-based location in Panorama City, California. National expansion began in 1995 with a store in Miami's Mall of the Americas, and international growth followed through franchise arrangements.

By 2015, the company had grown into a global operation with over 600 stores in more than 40 countries. Annual revenue peaked at approximately $4.4 billion, and the company employed 43,000 people worldwide. The Chang family's net worth reached an estimated $5.9 billion. The business model depended on speed and scale: identify trending styles, manufacture quickly through overseas vendors, and deliver to mall storefronts at prices that undercut department stores.

The same aggressive expansion that drove growth would contribute to the company's downfall. The company sourced from over 1,000 primarily foreign vendors, with manufacturing concentrated in China, Korea, and Hong Kong. International overextension into markets like Japan, Europe, and Latin America strained the balance sheet. And by the mid-2010s, a new generation of competitors emerged—ones that could move even faster and reach consumers directly without the cost burden of physical stores.

The First Fall and SPARC Acquisition

Forever 21's first bankruptcy came in September 2019 (Case No. 19-12122), driven by financial distress from aggressive foreign expansion. The company filed in Delaware and sought to reorganize while closing underperforming locations. At the time, it represented one of the largest retail bankruptcies of the year, with the company closing stores across the globe and exiting major international markets including Europe and most of Asia.

A consortium of buyers emerged. In February 2020, Simon Property Group, Brookfield Property Partners, and Authentic Brands Group acquired Forever 21's operating business for approximately $81 million. Brookfield later sold its stake to SPARC Group Holdings LLC, creating a joint venture structure under SPARC Group LLC that included Authentic Brands Group, Simon, and eventually Shein as minority partners. The acquisition separated ownership of the Forever 21 intellectual property—which went to ABG—from the operating company.

The post-acquisition restructuring reduced the store count from approximately 413 to 354 locations. Critically, the new ownership renegotiated lease terms—approximately 75% of leases were converted from flat rent to a percentage-of-revenue structure. This arrangement provided downside protection during slower months but couldn't solve the fundamental competitive challenges.

The initial post-acquisition performance showed promise. Fiscal year 2021 saw approximately $2 billion in revenue and $165 million in EBITDA as pandemic restrictions eased and consumers returned to stores. Authentic Brands Group CEO Jamie Salter had built ABG into a $32 billion licensing company on the philosophy that "we don't buy distressed brands. We buy distressed companies. Big difference. The brands are not broken. The model is broken."

Forever 21 did not fit this model. Salter later acknowledged that acquiring the brand was "probably the biggest mistake I've made."

The De Minimis Disruption

Forever 21's collapse illustrates how trade policy can reshape competitive landscapes within an industry. The company explicitly attributed its failure to the de minimis exemption—a provision allowing goods valued under $800 to enter the United States duty-free without rigorous customs inspection. This loophole became the mechanism by which Chinese-founded platforms Shein and Temu undercut domestic retailers.

The scale of de minimis exploitation grew exponentially. Customs and Border Protection processed over 1.3 billion de minimis shipments in 2024—more than double the 640 million processed in 2023. Approximately 60% of these shipments originated from China and Hong Kong. By 2024, CBP was handling approximately 4 million de minimis shipments daily.

Shein capitalized on this advantage to become the dominant player in U.S. fast fashion. Shein captured 50% of the U.S. fast-fashion market share—doubling its position since March 2020. The platform grew by nearly 160% while the broader fast-fashion market grew just 15%. Shein had captured approximately one-fifth of the entire online fashion market in the United States. For context, the second-largest fast-fashion brand in the U.S., Zara, held only 13% market share.

Customer spending data underscored the competitive threat: 43% of Forever 21 shoppers also shopped at Shein. Those customers spent an average of $253 at Shein annually—a 17% year-over-year increase—while their spending at Forever 21 dropped more than 12%.

Forever 21's management was unequivocal about causation: the company was "unable to find a sustainable path forward, given competition from foreign fast fashion companies, which have been able to take advantage of the de minimis exemption to undercut our brand on pricing and margin."

Trade policy reform eventually came—but too late for Forever 21. In April 2025, President Trump signed Executive Order 14324 eliminating the de minimis exception for all countries after August 29, 2025. The de minimis exemption for China and Hong Kong was separately eliminated on May 2, 2025, pursuant to Executive Order 14256. The administration cited combating illicit synthetic opioid flows as the rationale. By that point, Forever 21 was already liquidating.

The Catalyst Exclusion and Path to Liquidation

In December 2024, SPARC Group merged with JCPenney to form Catalyst Brands. The combined entity launched with more than $9 billion in revenue and 1,800 store locations, encompassing JCPenney, Aéropostale, Lucky Brand, Nautica, and Brooks Brothers. Forever 21 was explicitly excluded from the portfolio.

When asked why, Catalyst CEO Marc Rosen stated: "As we looked at the brand portfolio, we determined that our high-quality, iconic American brands would be the best fit." Forever 21 was excluded from the new platform before the bankruptcy filing.

Financial deterioration had accelerated. The Debtors reported cumulative losses exceeding $400 million over the prior three fiscal years, with fiscal 2024 alone generating a $150 million loss. An additional $180 million in EBITDA losses was projected through 2025. The company was burning cash with no path to profitability.

The capital structure at filing reflected the severity of the situation:

Additionally, the Debtors owed approximately $323 million to SPARC Group under a cash pooling arrangement—an intercompany payable that would become significant in plan negotiations.

The marketing process yielded no viable going-concern buyer. SSG Advisors, formally retained on January 17, 2025, contacted 217 potential buyers. Approximately 30 parties signed confidentiality agreements and conducted due diligence. None emerged with a transaction.

The store footprint at filing reflected Forever 21's deep integration into American mall retail. Of the 354 leased locations across 78 landlords nationwide, approximately 123 were in traditional malls and 55 in outlet centers. Simon Properties hosted 27% of locations; Brookfield Properties hosted 19%. The company also operated a 656,000-square-foot distribution center in Perris, California, and maintained e-commerce operations through Forever21.com—though online sales represented only approximately 11% of domestic revenue.

Store closing sales began before the bankruptcy filing—236 locations on February 14, 2025, followed by the remaining 118 on February 27, 2025.

Liquidation and Plan Confirmation

With no buyer in sight, the chapter 11 cases proceeded as an orderly liquidation. Paul, Weiss, Rifkind, Wharton & Garrison LLP served as lead restructuring counsel, with Young Conaway Stargatt & Taylor, LLP as Delaware co-counsel. The Debtors entered bankruptcy with a Plan Support Agreement from their secured lenders, which facilitated the orderly wind-down process. The Debtors did not obtain traditional DIP financing; instead, they operated on cash collateral with consent from the prepetition secured parties, subject to a minimum sweep balance of $65 million.

A joint venture of Hilco, Gordon Brothers, and SB360 Capital Partners managed the store closing sales. All 354 stores closed by April 30, 2025—ahead of the originally projected May 1 deadline. At filing, Forever 21 employed over 9,200 workers; the Los Angeles corporate headquarters was shuttered, with 358 employees laid off, including managers, designers, supply chain directors, and the chief merchandising officer. No executory contracts or unexpired leases were assumed—a complete liquidation with no operating footprint retained.

An Official Committee of Unsecured Creditors was appointed on March 26, 2025, retaining McDermott Will & Emery LLP as lead counsel, Cole Schotz P.C. as Delaware co-counsel, and Province, LLC as financial advisor. The Committee initially objected to the Disclosure Statement, citing insufficient information regarding third-party releases, events leading to bankruptcy, and claim impairment. These objections were resolved through the Committee Settlement, which significantly improved general unsecured creditor recoveries. Steven Balasiano of MHR Advisory Group, LLC was appointed Plan Administrator to oversee the post-confirmation wind-down, including claims resolution and final distributions. The Court set a general bar date of May 12, 2025, with governmental entities having until September 12, 2025 to file proofs of claim.

The confirmed plan featured the following classification and recovery structure:

The plan featured a distribution waterfall tied to voting outcomes: if Class 6 (General Unsecured Claims) accepted the plan, ABL creditors would receive 94% of net proceeds while unsecured creditors would receive 6%. If Class 6 rejected, the split would shift to 97/3 in favor of ABL. This structure incentivized unsecured creditor acceptance.

The settlements improved recoveries across multiple classes. For ABL creditors, initial Disclosure Statement projections of 0.86% to 0.97% increased to 2.36% to 3.01% in the confirmed plan. For general unsecured creditors, the improvement was even more dramatic: initial projections of just 0.07% to 0.15%—a near-total wipeout for trade creditors and landlords—improved to 3% to 6%, a 20-40x increase. The Committee Settlement included SPARC waiving 100% of its recovery on the ~$323 million intercompany claim, effectively subordinating insider claims to benefit third-party unsecured creditors.

All voting classes accepted the plan. Classes 3, 4, and 5—representing ABL, Term Loan, and Subordinated Loan creditors holding approximately $1.6 billion in claims—voted unanimously in favor. Class 6 (General Unsecured Claims) voted 98.12% in favor by number and 91.57% by amount—365 of 372 ballots accepting, with only 7 rejections representing approximately $19.7 million in claims. The overwhelming creditor support, despite minimal recoveries, reflected recognition that the Committee Settlement had maximized available value.

What Survives and What It Means

Forever 21's U.S. retail presence is gone, but the brand persists. International licensees continue operating Forever 21 stores outside the United States, and Authentic Brands Group retains ownership of the intellectual property. ABG's asset-light licensing model—which generates over 70% adjusted EBITDA margins—allows brands to continue even when operating companies fail. The brand may survive through international licensing arrangements, but U.S. retail operations have ended.

As of December 2025, the main F21 OpCo case remains open for post-confirmation wind-down. The subsidiary cases—F21 Puerto Rico, LLC and F21 GiftCo Management, LLC—are moving toward final decree. The Plan Administrator filed omnibus claims objections in November 2025, reclassifying and disallowing certain late-filed, amended, and duplicative claims. The claims objection deadline has been extended to June 29, 2026, and the deadline for removing actions was extended to March 16, 2026. Final professional fee applications totaling approximately $7.76 million were approved in September 2025. Data breach litigation stemming from a March 2023 ransomware attack continues in California federal court but is being handled through cyber insurance proceeds rather than estate assets.

The Creditors' Committee investigation into the IP sale to Authentic Brands Group remains a question mark. Creditors are probing how ABG came to own 100% of Forever 21's intellectual property after initially sharing ownership with Simon Property Group and Brookfield. Whether this yields additional recoveries remains to be seen.

Forever 21's explicit attribution of its failure to the de minimis exemption provides a documented case study for trade policy debates. The company's liquidation may have come too late to benefit from reform, but it stands as evidence of how tariff loopholes can enable foreign competitors to displace domestic retailers. Questions remain about whether any mall-based fast-fashion model is viable against direct-to-consumer overseas competitors shipping duty-free.

The broader mall retail context underscores structural challenges. Approximately 1,200 malls remain in the U.S. as of 2025, but only around 900 are projected to still be operating by 2028. Nearly 87% of large shopping malls may close within the decade. Forever 21's liquidation—all 354 leases rejected, no stores assumed—represents an acceleration of this trend.

For the Chang family, the trajectory from $11,000 in savings to $5.9 billion net worth to complete liquidation represents a complete reversal. For creditors, recoveries of under 3% on $1.09 billion in ABL debt and zero on $497 million in term and subordinated loans illustrate the severity of value destruction. For the fast-fashion industry, Forever 21's outcome raises questions about whether any mall-based domestic retailer can compete against overseas direct-to-consumer platforms shipping duty-free.

For more analysis of retail sector restructurings, see ElevenFlo's bankruptcy coverage.