What do workers at Forever 21 have in common with Guatemalan garment workers at the Industrial Hana factory? They’ve both been left in the lurch by private equity and a web of holding companies led by Authentic Brands Group and Catalyst Brands (formerly SPARC Group). These names are not household names, yet they are now reshaping the fashion industry–and the livelihoods of millions of workers worldwide. 

This week’s news that Forever 21 is filing for bankruptcy has been met by plenty of commentary on how they’ve failed to keep up with trends, the rise of online shopping, and the demise of the shopping mall. But the real villain in the story is not just consumer trends or bad business decisions. Instead, this is a case of private equity teaming up with fast fashion to cook up a business model that’s even more toxic for working people. 

Lowball Deal Leaves Suppliers, Workers to Pay the Price

Forever 21 first filed for bankruptcy in 2019. The company was bought out of bankruptcy in February 2020 by a group that included Authentic Brands, Brookfield Property Partners, and Simon Property Group.¹ This group purchased Forever 21 for $81 million. The new owners split the company in two–one entity took over the brand’s intellectual property, licensed it to the other, which ran its operations.

Suppliers and landlords challenged the discounted purchase price in court, warning that it would leave them with massive losses. One suit brought by suppliers stated they were owed $40 million in unpaid orders shipped since the bankruptcy filing, as well as “literally hundreds of millions of dollars” more in unpaid claims. However, the deal went through with just $53 million set aside to cover unpaid merchandise. 

And that’s just the beginning. This consortium of buyers was set up to win big, while leaving suppliers, supply chain workers, and communities to pay the price.

In the next section, we’ll look at the key players in the Forever 21 deal.

Real Estate Investment Trusts Reanimate Zombie Malls

Brookfield and Simon are two of the largest owners of mall properties in the U.S. and were Forever 21’s biggest landlords. Their interest in the deal was clear: keep one of their anchor tenants from leaving cavernous vacancies in the shopping malls they own across the U.S. 

Some have noted that there are clear conflicts of interest when real estate companies, such as Brookfield and Simon own large stakes in their tenants. Yet when asked about acquiring more of their own tenants, shortly before the Forever 21 acquisition, Simon Property CEO David Simon said: “We’re certainly as good as the private-equity guys when it comes to retail investment. … And so, I wouldn’t rule it out.” 

Both Simon and Brookfield have lobbied Congress to relax limits on how many of their tenants’ real estate investment trusts (REITs) can own, among other rules.² These rules exist to ensure that lease terms and rent are both actually reflective of the market. Otherwise, if a mall landlord effectively controls both sides of a lease negotiation, they could game the system, lowering rent for their own tenants or artificially inflating the value of their real estate by charging above-market rents that independent tenants would never agree to. 

In 2021, Brookfield sold off its 25% stake in Forever 21 for $63 million.³ 

Authentic Brands Group: Resurrecting Distressed Brands & Squeezing Them Dry

Authentic Brands Group (ABG) purchased a 37.5% share of Forever 21 in the 2020 deal–part directly and part through its stake in SPARC Group. This added the fast fashion brand to a sizable portfolio of brands that Authentic owns. Since its founding in 2010, Authentic has used private equity investments to buy up a rapidly growing collection of “distressed brands,” often snatching them out of bankruptcy for low prices. 

There’s an important semantic distinction to emphasize here. What Authentic is buying is indeed just the brand or the intellectual property – the name, logo, trademarks and overall identity. In a 2021 SEC filing,⁴ the company boasted to potential investors that:

“ABG deconstructs and reconstructs the traditional model, owning only the brands, creating a decentralized network of best-in-class partners to execute the rest of the value chain. We are brand owners, curators and guardians. We don’t manage stores, inventory, or supply chains. We don’t manufacture anything. We are a licensing business and are purely focused on brand identity and marketing.”

The filing goes on to describe this as “a sustainable, strong royalty model with recurring, asset-light growth” which “[drives] a flywheel of successful revenue and brand growth that fuels free cash flow to invest in additional brands.” By buying up the names of well-known brands like Aeropostale, Brooks Brothers, Eddie Bauer, Lucky Brand jeans, and Sports Illustrated, just to name a few, Authentic Brands Group is then able to make money by licensing those brand names to operating partners to use on their products. 

But while Authentic describes this model as “a flywheel of successful revenue,” the companies behind the actual product don’t necessarily fare so well. Authentic charges companies licensing fees or royalties for the use of the brand calculated on sales. Companies are assessed Guaranteed Minimum Royalties (GMRs) based on a calculation (often 5%) of the companies’ sales of products incorporating an Authentic brand. The first year’s GMRs are typically due in full when the licensing agreement is signed, with later estimated royalties due quarterly. If sales exceed the forecast, then royalties are due on additional sales, although no adjustment is made if sales are below the forecast. Companies are also charged an additional fee for marketing support, per the 2021 SEC filing. 

This fee structure effectively pushes risk off of Authentic and saddles the operating companies with additional costs.

A case study of Vince, another Authentic brand, shows how, despite increasing margins and profitability–conventional measures of success–Vince Holding Corp., the brand’s operator, remained weighed down by the royalty fees owed to Authentic. Despite swinging from a net loss of $38.3 million in 2022 to $25.5 million net income the following year, these gains were not enough. Instead, the CEO told analysts that the company was aiming to cut $30 million in costs over three years “to help mitigate royalty fees now incurred in our go-forward operating model.” 

Now is the time to note that it is not the Authentic-owned Forever 21 licensing venture that is going bankrupt in 2025. Instead, it is the operating venture F21 OpCo LLC, a holding company wholly owned by SPARC Group (now Catalyst Brands). Their stores will close (unless a new buyer comes forward), and thousands of people will lose their jobs, but Authentic has plans to come out ahead. 

SPARC Group (Now Catalyst Brands): Authentic’s Distribution Channel

At the time they bought Forever 21, SPARC Group (Simon Properties Authentic Retail Concepts) was a joint venture between Authentic Brands and Simon Property Group.⁵ It operates several Authentic brands, including Nautica, Forever 21, Aéropostale, Lucky Brand, Eddie Bauer, and Brooks Brothers. 

This structure allows Authentic to simultaneously maximize “influence over a significant distribution channel,” as they claimed in 2021 SEC filings, while distancing itself from the risks of operating the nuts and bolts of its supply chain.  

It also ensures a source of revenue for both of its owners. Simon Property Group was SPARC’s largest landlord and collects rent from SPARC-operated stores in their malls. SPARC pays royalties to Authentic based on sales of products bearing their brands’ names (these royalties made up approximately 7-11% of Authentic’s revenue in 2020-2021).⁶ 

The success of this model – and it is successful for those at the top – relies on buying up companies at below-market prices and stripping them down to their parts. Authentic then cashes in on the brand through licensing deals and rapid expansion into new markets, and SPARC focuses on aggressively cutting costs, or, as then-CEO of SPARC Group explained to Women’s Wear Daily, “we get out of bad stores. We buy the inventory at a discount. We right-size the overhead, and we operate with better business judgment.” 

In practice, what that looks like is suppliers getting squeezed harder. That squeeze gets passed down the chain to workers with lower wages and rushed orders fueling excessive overtime. And, if the combination of leveraged debt and royalties becomes too much for the holding company’s operations, the next step can be bankruptcy, unloading the unprofitable company and leaving the brand more or less intact for Authentic to potentially relicense and start again. 

Winners: Billionaires at the Top; Losers: Working People Around the World

Authentic Brands Group’s model relies on quick profits and offloading risks to others. Behind their acquisitions spree is a lineup of private equity firms, including as of this writing, Blackrock, CVC Capital Partners, HPS Investment Partners, General Atlantic, and Leonard Green & Partners, most of whom have seats on Authentic’s board of directors. 

Private equity firms have come under scrutiny in recent years for what former federal prosecutor Brendan Balou dubbed their “metastasized” growth, calling the model “a job-killing, business-destroying, community-crushing machine the likes of which we haven’t seen since the money trusts of the nineteenth century. In other words, it’s predatory capitalism on steroids.”

Forever 21’s bankruptcy is not an isolated occurrence. The Private Equity Stakeholder Project (PESP) found that private equity-backed businesses play an outsized role in corporate bankruptcy filings. In 2024, private equity firms played a role in 56% of large U.S. corporate bankruptcies, disproportionately impacting workers and communities. Scroll through the people associated with SPARC Group’s LinkedIn page and face after face is ringed with the green “Open to Work” banner, putting faces to the impact of the layoffs of over 350 people from Forever 21’s corporate headquarters. The chain also has approximately 350 stores in the U.S.; the fate of those stores and the people who work there remains undetermined. They are not alone. PESP’s research tallied 65,850 layoffs from private equity-related bankruptcies just in the year 2024.

U.S.-based workers are not the only ones harmed by Authentic Brands Group’s private equity-fueled business model. In Guatemala, approximately 250 workers who sewed for Lucky Brand, another Authentic brand operated by SPARC Group (now Catalyst Brands), are still waiting for $500,000 in legally-mandated severance pay. Authentic and SPARC Group (now Catalyst Brands) have yet to fulfill their responsibilities to ensure these workers are paid what they are owed. 

As noted above, suppliers for Forever 21 were not adequately compensated for merchandise in the last bankruptcy. Will suppliers and workers be left holding the bag yet again? 

Authentic Brands Group Promises to Make a Toxic Business Model Worse

Forever 21 once set the pace as the fastest of fast fashion brands, until they were outpaced by Shein and Temu in the race to the bottom. On the way down, Shein bought into SPARC group, taking on one-third ownership stake in 2023, with SPARC group in turn taking a minority stake in Shein. Forever 21 was long known for their fast production cycles, flooding stores with new styles at super low prices–prices kept low by paying workers below minimum wages.

Commentators have followed the lead of Forever 21, pointing the finger at Shein and Temu for the company’s bankruptcy. Both Shein and Temu have come under intense scrutiny for concerns about forced labor and other human rights abuses in their supply chains fueled by their low prices and ultra-fast production cycles. Yet even as Shein and Temu are under scrutiny for their toxic business practices, it appears that Authentic Brands Group is looking to emulate their model. 

In a statement to USA TODAY, Authentic Brands made clear that the bankruptcy of F21 OpCo LLC does not end Forever 21 as a brand. Instead, “It presents an opportunity to accelerate the modernization of the brand’s distribution model, setting it up to compete and lead in fast fashion for decades to come.” Authentic Brands’ goal, per USA TODAY: “to ‘take the brand to the next level’ by building a direct creation-to-shelf model that will accelerate production cycles and ‘deliver the best products at the best prices.’” 

In short, Authentic Brands Group looks at a business model that has been criticized for harming workers, communities, and the environment, and vows to repeat and accelerate those business practices. 

Forever 21’s bankruptcy is yet another example of private equity-fueled cycle of acquisitions and speedy profits is putting corporate profits before human rights – and leaving a trail of layoffs and unpaid workers in its wake. 

1. SPARC Group joined with JC Penney in January 2025 to form Catalyst Brands: https://www.retaildive.com/news/jc-penney-brooks-brothers-operator-sparc-group-join-forces-catalyst-brands/736872/ ↩︎
2. As of March 2025, HR840 did not move beyond committee. Currently, there are no laws permitting REITs to make the changes included in HR840:
   • Own a 50% stake in a tenant (up from the existing 10% limit).
   • Expand the amount of space a REIT is allowed to lease to its own taxable subsidiary.
   • Accept equity in a tenant’s business as rent in lieu of cash. ↩︎
3. Brookfield sold its share in Forever 21 converting that position into equity in Authentic Brands Group. Simon also swapped its share in the licensing venture for Authentic Brands Group equity but held on to 50% of the operating company through SPARC Group. Brookfield Property Group’s parent company, Brookfield Corporation later rejoined the operating side through SPARC’s merger with JCPenney to form Catalyst Brands– and in truth, it never fully left the licensing side, maintaining a significant stake in Authentic.  ↩︎
4.  In 2021, Authentic Brand Group filed for an IPO, submitting required disclosures to the Securities and Exchange Commission (SEC), which they later withdrew.  ↩︎
5. SPARC Group (Simon Properties Authentic Retail Concepts) was founded in 2016 as a joint venture between Authentic Brands, Simon Property Group, and Brookfield Properties, with financial backing from Simon and Brookfield’s real estate interests and Authentic’s private equity capital. Shortly before purchasing Forever 21, Authentic bought out Brookfield’s interest, and SPARC became a 50-50 venture between Simon and Authentic. ↩︎
6. Authentic also in turn pays SPARC “a ‘know-how’ fee “as compensation for the assistance provided by SPARC to the Company’s third-party licensees who are manufacturing inventories using SPARC’s design and specifications.” ↩︎