When Forever 21 Inc. sold itself out of bankruptcy this year, it left behind hundreds of millions of dollars in debt owed to suppliers, shippers and landlords. Now, as they seek to get repaid by the fast-fashion chain’s estate, it’s becoming clear that they’re in for some serious pain, Bloomberg News reported. The U.S. Department of Justice’s bankruptcy watchdog is urging the judge overseeing the shell company’s case to convert it to a chapter 7 liquidation from a chapter 11 reorganization, estimating that high-ranking creditors owed some $250 million will likely only get 17 percent of that money back, or less than $50 million, according to court papers. The estate’s lawyers concede that the bankrupt entity is deeply insolvent, but oppose the U.S. Trustee’s attempt to convert the case to a chapter 7, court papers show. The conversion would complicate its efforts to maximize the entity’s remaining value, including efforts to sell a warehouse for $15.2 million and $24.3 million of tax refunds under the CARES Act, according to court papers. A hearing on the attempt to convert the case to chapter 7 is scheduled for today.
