A committee of unsecured creditors to Forever 21 Inc.âs US operator said they are âaggressively investigatingâ all deals made by the retailer before it filed for Chapter 11, including JCPenneyâs acquisition of the operatorâs parent Sparc Group.
The acquisition âjoined and obligatedâ Forever 21 and certain affiliates to pay JCPenneyâs existing debt, the committee alleged in a Thursday court filing. The Forever 21 operator filed bankruptcy last month with about $1.6 billion in funded debt obligations, according to court documents.
The unsecured creditors committee said it would investigate the transaction as part of a broader written objection to the companyâs request to tap lendersâ cash. The group said it is opposing terms in the companyâs request that would give its lenders liens or claims to potential legal actions against Forever 21 or its backers.
Sparc, which operated Forever 21, Aeropostale and other fashion brands, announced in January that it had merged with JCPenney to form a new company, Catalyst Brands. Forever 21âs intellectual property is owned by Authentic Brands Group, which licensed the brand to the retail operating company that filed bankruptcy, according to court documents.
Representatives for Forever 21âs bankrupt operator, Authentic Brands Group and Catalyst Brands didnât immediately respond to requests for comment on Friday.
The committeeâs Thursdayâs court filing said vendors and other unsecured creditors will be ânet losersâ in part because the bankrupt operator appears âto have sold their valuable Forever 21 intellectual property assetsâ prior to the Chapter 11 case.
The creditor group also alleged Forever 21âs operator âextracted significant discountsâ on goods shipped just before the March bankruptcy filing, even though those claims would be entitled to full payment under the bankruptcy code. Other large vendors are holding a significant amount of Forever 21-branded inventory that theyâve been unable to resell, the committee said.
Forever 21, a fashion brand targeting young women founded in 1984, is also liquidating all US stores. The operator earlier disclosed to court that the projected recovery for secured lenders could be as low as between 2 percent and 3 percent.
The companyâs next bankruptcy hearing is scheduled for Tuesday.
The case is F21 OpCo LLC, number 25-10469, in the US Bankruptcy Court for the District of Delaware.
By Dorothy Ma and Jonathan Randles
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