(Bloomberg) – U.S. operators of Forever 21 Inc.’s unsecured creditors committee said they are “actively investigating” all deals by retailers before filing Chapter 11, including JCPenney’s acquisition of SPARC Group, the operator’s parent company.
The committee noted in a court filing Thursday that the acquisition “joined and obliged” 21 and certain branches to repay JCPenney’s existing debt. Court documents show that last month, Forever 21 operator filed for bankruptcy with a debt funding obligation of about $1.6 billion.
The unsecured creditors committee said it would investigate the transaction as part of a broader written objection to the company’s demand to crack down on lenders’ cash. The organization said it would give its lender a lien or a claim against Forever 21 or its supporters, as required by the company is against the terms.
SPARC, the operator of Forever 21, Aipostostale and other fashion brands, announced in January that it merged with JCPenney to form a new company, Catalyst Brands. Court documents show that Forever 21’s intellectual property is owned by Antratic Brands Group, which licensed the brand to a retail operation company, which filed for bankruptcy.
Representatives of Forever 21’s bankrupt operator, Authentic Brand Group and Catalyst brands did not immediately respond to a request for comment on Friday.
The commission’s court application on Thursday said suppliers and other unsecured creditors would be “net losers,” in part because the bankrupt operator appears to have “sold their valuable Forever 21 intellectual property assets” before the Chapter 11 case.
Creditor Group also accused Forever 21’s operator of “taken out substantial discounts” on goods ahead of the March bankruptcy filing, even if these claims are entitled to full payment under the Bankruptcy Act. The committee said other large suppliers are holding large permanent 21 brands in stock that they cannot resell.
Forever 21 is a fashion brand targeting young women founded in 1984 and is also liquidating all U.S. stores. The operator earlier revealed to the court that the expected recovery rate for mortgage lenders could be as low as 2% to 3%.
The company’s next bankruptcy hearing is scheduled for Tuesday.
The case is F21 OPCO LLC of the Delaware Bankruptcy Court, U.S., No. 25-10469.
– Assistance with Eliza Ronalds-Hannon.
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