NEW YORK (BLOOMBERG) – Forever 21 Inc filed for bankruptcy protection, adding another big fashion merchant to the tally of retailers who couldn’t cope with high rents and heavy competition.

CNBC reported that the retailer plans to exit most of its international locations in Asia and Europe, and has requested approval to close up to 178 US stores.  Forever 21, whose aggressive real estate expansion weighed on its finances, has 815 stores globally.  It does not expect to exit any major markets in the US and will continue operations in Mexico and Latin America.

Court papers filed in the Bankruptcy Court for the District of Delaware show Forever 21 has estimated liabilities on a consolidated basis of between US$1 billion (S$1.38 billion) and US$10 billion. The Chapter 11 filing allows the Los Angeles-based company to keep operating while it works out a plan to pay its creditors and turn around the business.

Forever 21 has obtained US$275 million in financing from lenders with JPMorgan Chase & Co as agent, as well as US$75 million in new capital from TPG Sixth Street Partners and its affiliated funds.

“The financing provided by JPMorgan and TPG Sixth Street Partners will arm Forever 21 with the capital necessary to effect critical changes in the US and abroad to revitalise our brand and fuel our growth, allowing us to meet our ongoing obligations to customers, vendors and employees,” Ms Linda Chang, executive vice-president of Forever 21, said in a statement.

A bankruptcy filing could help Forever 21 get rid of unprofitable stores and raise fresh funds. This could be problematic for major US mall owners, including Simon Property Group Inc and Brookfield Property Partners LP, because Forever 21 is one of the biggest mall tenants still standing after a wave of bankruptcies. The busts emptied more than 12,000 stores in the past two years, and those vacancies may be hard to fill.

Simon counts Forever 21 as its sixth-largest tenant excluding department stores, with 99 outlets covering 1.5 million square feet as of March 31, according to a filing.

Founded in 1984, Forever 21 specialises in fast-fashion apparel – trendy, cheap, quickly made knock-offs of original designs that often are worn only a few times before being given away or tossed out. Competitors include Zara, H&M and Amazon.com.

Co-founder Do Won Chang has been focused on maintaining a controlling stake in Forever 21, which hindered efforts to raise new funds. Matters are likely to be out of his hands now, with creditors typically setting the agenda in bankruptcy proceedings and major decisions subject to a judge’s approval.

Kirkland & Ellis LLP is the company’s legal adviser, and Alvarez & Marsal is the restructuring adviser, and the investment banker is Lazard.