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A committee of unsecured Forever 21 creditors has objected to a bankruptcy plan by its debtors and is investigating what it describes as a transfer of the fast-fashion brand’s intellectual property assets, according to documents filed last week with the U.S. Bankruptcy Court for the District of Delaware.
“The prospects of a going concern sale are grim given that the Debtors appear to have sold their valuable Forever 21 intellectual property assets to a subsidiary of Authentic Brands Group, an affiliate of the Debtors’ majority equity holders, prior to the Petition Date,” the committee wrote in the filing.
The committee is alluding to a statement by Stephen Coulombe, co-chief restructuring officer of F21 OpCo, the entity that filed under Chapter 11 on March 16 and is essentially Forever 21’s U.S. operating company.
Coulombe doesn’t provide details about any transaction that may have shifted ownership, but goes on to say that, without the “valuable intellectual property,” the retailer is unlikely to be able to continue “as a going concern.”
An Authentic spokesperson confirmed that, at some point after early 2020, Authentic took 100% ownership of Forever 21’s IP, after sharing it for a time with mall REITs Simon Property Group and Brookfield. The current bankruptcy process doesn’t affect the fact that the IP will continue to be solely owned by Authentic, the spokesperson also said.
A consortium of the three companies, dubbed Sparc Group, acquired Forever 21 during its last bankruptcy in 2020. That included all of Forever 21’s trademarks, intellectual property and intellectual property licenses, according to court documents from February that year.
Later in 2020, Sparc became a 50/50 joint venture between Simon Property Group and Authentic tasked with the operations of various brands; Sparc had no stakes in their IP. In 2021, Brookfield said it had sold off its interest in Forever 21.
Sparc Group has shifted both its ownership and its portfolio more than once before getting folded into Catalyst Brands, a combination with J.C. Penney, earlier this year. Authentic is also an investor in Catalyst.
Over the past few years, Sparc collected a series of brands via their respective bankruptcies. They include Aéropostale, Brooks Brothers, Eddie Bauer, Lucky Brand and Nautica, and are now under Catalyst’s umbrella.
Catalyst has had a rough year so far, laying off 5% of its corporate staff in February and another 9% this month. When Catalyst announced its formation in January, it said it was exploring strategic options for Forever 21.