Kroll Bond Rating Agency (KBRA) releases a special report, Forever 21 Endgame: An Update on CMBS Exposure and Impact, which examines CMBS exposure to Forever 21 as either a collateral tenant, non-collateral tenant or recent closure in the wake of the acquisition of the fast-fashion retailer by a consortium of Simon Property Group, Brookfield Property Partners, and Authentic Brands Group. On February 13, 2020, the U.S. Bankruptcy Court for the District of Delaware approved an $81.1 million stalking horse bid by the consortium to acquire substantially all of Forever 21’s assets and liabilities. The Stalking Horse Purchase Agreement was executed on February 3 and no other competing bids emerged in a subsequent auction that was held prior to the final approval of the sale. Prior to the acquisition, Simon and Brookfield were two of Forever 21’s largest creditors.
Throughout Forever 21’s bankruptcy proceedings, properties securing CMBS loans have been impacted by announced closures, lease rejections and lease modifications. According to bankruptcy documents, there were 103 domestic store closings as of the end of January 2020. KBRA identified at least 134 lease rejections across seven separate notices, including leases for new store openings and relocation agreements. We have identified 38 properties securing 38 loans in our CMBS coverage universe, $6.7 billion by allocated loan amount (ALA), that were impacted by a lease rejection from a Forever 21-affiliated tenant. We will continue to monitor ongoing developments related to Forever 21 and report on potential consequences for CMBS collateral within our monthly KCP report for each transaction. For subscribers of the KCP platform, an updated list of loans and properties with exposure to Forever 21 as tenant, as well as locations designated for closure and locations impacted by lease rejections, is available by clicking here.
To access the full report, click here.
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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