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Simon Property, Authentic Brands consider buying bankrupt Forever 21
[NEW YORK] Mall owner Simon Property Group is considering a bid to buy Forever 21, the bankrupt teen retailer that's running out of money and time, according to people with knowledge of the matter.
Simon Property would pair with Authentic Brands Group to buy and operate the stores and the brand, said the people, who asked not to be identified because the discussions are private.
The talks are continuing, and there's no guarantee that the various sides will agree on terms or that a sale will result.
Representatives for Los Angeles-based Forever 21 and Simon Property didn't respond to messages seeking comment, and Authentic Brands declined to comment.
Forever 21 was talking about selling a stake to Simon Property and its other largest landlord, Brookfield Property Partners, before it filed for bankruptcy in September, Bloomberg previously reported. Talks broke down and the company had to seek court protection without a reorganisation plan in place.
The chain has since struggled to raise money to exit bankruptcy, with potential lenders and buyers balking because of poor sales and the founding Chang family's insistence on maintaining control.
Forever 21 told suppliers in recent weeks that it's short on cash and that it could be forced to liquidate if a buyer doesn't emerge. It asked them in a letter to ship goods on credit while talks continue with a potential buyer, which it didn't name.
The retailer is unable to borrow more money, and "therefore is turning to you in an effort to continue operating," Forever 21 said in the letter, a copy of which was reviewed by Bloomberg. Failure to find a new owner could force it into liquidation, the company wrote.
Forever 21 expects to provide information on the potential buyer in the coming weeks, according to the letter.
The bankrupt retailer proposed to give suppliers half of what they're owed in cash for goods delivered between Jan 20 and Feb 4. They would be paid in the week following receipt of the goods.
The other 50 per cent of the payment owed would be deemed an unsecured "superpriority" administrative claim in the company's bankruptcy proceedings, ranking behind Forever 21's lenders for repayment.
The arrangement would need approval from a judge overseeing the bankruptcy case.