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KBRA Credit Profile (KCP) Releases Special Report: Forever 21 Revised Lease Rejection Schedule – CMBS Exposure


Kroll Bond Rating Agency (KBRA) releases a special report, “Forever 21 Revised Lease Rejection Schedule – CMBS Exposure”, which examines CMBS exposure to potential Forever 21 bankruptcy closures. As part of its ongoing restructuring, Forever 21 filed a revised lease rejection schedule earlier this week. Sixteen new leases were identified for potential rejection, while 83 of the 178 leases outlined in prior filings will reportedly be spared from rejection following successful lease negotiations with landlords. Of the 83 locations no longer being considered for closure, 17 reside at properties serving as collateral in CMBS transactions (collectively $4.29 billion). CMBS exposure to the 16 newly identified closure targets consists of three properties (collectively $474.1 million). While a large portion of the 178 locations originally considered for closure will remain open, many properties will be impacted by rent reductions, some of which exceed 50%. Bankruptcy filings earlier this week also outlined Forever 21’s plans to exit most international markets including Europe, Canada and Asia, which would reduce its presence to just the U.S, Mexico and Latin America. The company also plans to close its 15 freestanding Riley Rose stores and terminate the related website. Liquidation sales at Forever 21 locations have commenced and store closures are expected to begin in late December 2019.

KBRA Credit Profile (KCP) examined its coverage universe and identified 43 stores across 62 transactions with exposure to Forever 21’s revised list of 111 potential store closures. The properties with exposure had an aggregate ALA of $6.74 billion as of October 2019. Nine of the 10 largest individual property exposures reside in SASB transactions, including The Shops at Mission Viejo loan ($295.0 million), which is one of the 16 newly identified closure targets. KCP will continue to monitor bankruptcy proceedings for potential lease modifications or rejections, as well as additional store closures. KCP subscribers can download the list of 43 stores by clicking here.

To read the full report, click here.

Related Publications: (available at kcp.kbra.com)



About KBRA and KBRA Europe

KBRA is a full-service credit rating agency registered with the U.S. Securities and Exchange Commission as an NRSRO. In addition, KBRA is designated as a designated rating organization by the Ontario Securities Commission for issuers of asset-backed securities to file a short form prospectus or shelf prospectus. KBRA is also recognized by the National Association of Insurance Commissioners as a Credit Rating Provider, and is a certified Credit Rating Agency (CRA) by the European Securities and Markets Authority (ESMA). Kroll Bond Rating Agency Europe Limited is registered with ESMA as a CRA.

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