Notable 2025 Cases: First Brands, Rite Aid, Forever 21, Joann

Introduction

Four cases defined the 2025 restructuring tape: First Brands Group, Rite Aid, Forever 21, and Joann. Each illustrates a different failure mode (alleged fraud, the Chapter 22 repeat-filer trap, the private-equity-owned retail fade, and the second-time-around liquidation), and together they cover most of the patterns Wall Street restructuring desks worked through during the year. Any candidate interviewing at the major Rx firms (PJT, Houlihan Lokey, Evercore, Lazard, Moelis) should be able to walk through at least two of these cases in detail, including capital structure entering distress, trigger event, case strategy, and creditor recovery profile.

This article walks through each case. The structure for every case is the same:

The data points come from court filings, Kroll Restructuring Administration case dockets, Bondoro case summaries, and contemporaneous press coverage.

First Brands Group is the case to know cold for any 2026 restructuring interview. The company, an Ohio-based automotive parts manufacturer with brands including Raybestos, FRAM, and TRICO, filed Chapter 11 on September 28, 2025, in the Southern District of Texas. The filing was a freefall, meaning no restructuring support agreement was in place when the petition hit and no clear path to confirmation existed at filing.

Capital structure: $10B+ liabilities and a $900M annual interest burden

The capital structure entering the case was unusual in size and complexity. Court documents showed total liabilities exceeding $10 billion, including approximately $6.1 billion in on-balance-sheet debt (with first-lien term loans alone exceeding $4.6 billion), $226.9 million in asset-based lending borrowings and letters of credit, and more than $2.3 billion in off-balance-sheet inventory and lease facilities. The annual interest burden alone exceeded $900 million. Total obligations reported in the petition reached $9.3 billion.

Trigger: alleged $2.3 billion factoring fraud

The trigger event was an alleged factoring fraud rather than operating distress. According to court filings and contemporaneous reporting, First Brands disclosed an issue with its factoring arrangements amounting to nearly $2 billion, with allegations of fabricated invoices and double-pledged receivables. The U.S. Department of Justice opened a criminal investigation. Founder and CEO Patrick James resigned and was subsequently sued by the company for what court documents called "grievous misconduct." An examiner was appointed with a $7 million budget to investigate the alleged factoring fraud, ultimately characterized as a $2.3 billion scheme.

DIP financing: $4.4B cross-holder facility from an 81-member group

The DIP financing came from an unusual source: an ad hoc group of cross-holders. The full DIP facility totaled $4.4 billion, comprising $1.1 billion in new money fully backstopped by members of an 81-member ad hoc first-lien lender group (including Antares Capital, Arena Capital Advisors, Black Diamond Capital Management, Eaton Vance, and PIMCO) plus a $3.3 billion creeping roll-up of prepetition term loans. Weil, Gotshal & Manges represented First Brands; the DIP structure tested the limits of permissible DIP loan provisions, drawing overwhelming opposition from competing creditor groups.

Claims dispute and the secondary-market collapse

The claims dispute is at the heart of the case's recovery profile. $4.4 billion of DIP claims and $4.6 billion of off-balance-sheet inventory and lease facility claims are now looking at the same business assets to generate recovery. Multiple SPV lenders assert competing claims to collateral that the debtor and DIP lenders also claim, creating priority disputes that the bankruptcy court will need to resolve. The First Brands debt traded down dramatically through the case: Apollo Management ran a high-profile short position that profited from the 95 cents to 50 cents collapse on the prepetition term loans, while UBS reportedly took losses of approximately $500 million as a senior holder. Some securitization paper traded as low as 30 cents on the dollar, an unprecedented decline for paper that had carried investment-grade trading levels mere months before.

Wind-down through early 2026

By February 2026, First Brands had filed multiple WARN notices in Ohio, announcing at least four location closures and the elimination of more than 1,200 jobs. The case is expected to result in a Section 363 sale of operating assets, with the recovery profile for unsecured creditors heavily dependent on the examiner's findings on the alleged factoring scheme. Supply-chain financing claims are expected to actively trade through 2026 as distressed funds attempt to position around the ultimate recovery percentages.

Rite Aid filed for Chapter 11 on May 5, 2025, in the District of New Jersey, less than two years after emerging from its prior October 2023 bankruptcy. That makes Rite Aid the most prominent "Chapter 22" case of 2025. Chapter 22 is the informal term restructuring practitioners use for any company filing Chapter 11 a second time, and while it is not technically a separate bankruptcy chapter, the dynamics of repeat filings are distinct enough to warrant the label.

Why the 2023 plan failed within nine months

The first Rite Aid bankruptcy emerged in August 2024 with a confirmed plan that converted prepetition debt into reorganized equity for senior creditors. That plan failed within nine months. The company reported $1 billion to $10 billion in both assets and liabilities at the second filing and disclosed that it could not secure additional financing to continue operating as a going concern. The 2025 case was effectively a managed liquidation rather than a turnaround attempt.

DIP financing: $1.94 billion roll-up to fund the wind-down

The DIP financing was sized to support the wind-down. Existing lenders provided $1.94 billion in debtor-in-possession financing, including a $1.7 billion revolving asset-based lending facility and a $240 million "first-in-last-out" (FILO) term loan. Roughly the entire DIP was a roll-up of prepetition debt rather than new money, reflecting the lender consensus that the company would not generate sufficient enterprise value to support additional new-money commitments.

Bifurcated auctions: pharmacy files first, real estate and IP second

The sale process was bifurcated into two auctions. The first auction, held on May 14, 2025, sold the core pharmacy assets (prescription files, pharmacy inventory) to multiple buyers. The sale hearing approved the winning bids on May 21, 2025. A second auction held around June 20, 2025 sold the remaining assets, including real estate, the Thrifty Ice Cream business, and intellectual property.

The May 21 auction effectively distributed Rite Aid's pharmacy footprint across its largest competitors:

CVS as the largest acquirer; Lazard's repeat mandate

CVS emerged as the largest acquirer, taking prescription files from approximately 600 Rite Aid pharmacies plus 64 full Rite Aid stores in Idaho, Oregon, and Washington. The total prescription file transfer covered more than 1,000 Rite Aid locations across the country, leaving the remaining store-level operations to wind down. Lazard ran the second consecutive Rite Aid debtor-side mandate; the firm had also advised the prior 2023 case.

The wind-down completed on October 3, 2025, when Rite Aid closed its final 89 stores, ending 63 years of operations. From filing to full liquidation, the case took approximately five months, an unusually fast timeline for a company of Rite Aid's size and reflective of the lender consensus that going-concern value did not exceed liquidation value.

Chapter 22

Informal industry term for a company filing Chapter 11 a second time after a prior Chapter 11 emergence. Roughly 15-20% of large Chapter 11 emergences ultimately result in a second filing within five years, with the most common drivers being insufficient deleveraging in the first plan, post-emergence operating underperformance, and unfavorable post-emergence capital market conditions. Rite Aid is one of the largest Chapter 22 cases in U.S. history.

The Rite Aid Chapter 22 outcome is a useful counterpoint to optimistic restructuring narratives. The 2023 case left the company with too little cash, too much continuing debt service, and a competitive position (against CVS, Walgreens, and big-box pharmacies) that made the post-emergence margin recovery effectively impossible. The 2025 second filing accepted that reality and converted the company into a sale of pieces rather than a continuing enterprise.

Forever 21 filed for Chapter 11 on March 16, 2025, marking its second bankruptcy filing in six years. The first Forever 21 case in 2019 ended with a sale to a venture led by Authentic Brands Group, Simon Property Group, and Brookfield Property Partners. The 2025 filing was made by F21 OpCo LLC, the operating entity owned by Catalyst Brands, an entity formed in January 2025 through the merger of Sparc Group (the prior Forever 21 operator) and JC Penney.

Capital structure: $400M+ in cumulative losses heading into the filing

The capital structure showed $100 million to $500 million in assets against $1 billion to $10 billion in liabilities, an asset-liability mismatch that effectively guaranteed unsecured creditor losses. Forever 21 had posted more than $400 million in cumulative losses over the prior three fiscal years and projected an additional $180 million EBITDA loss through 2025.

Trigger: no going-concern buyer at any acceptable price

The trigger was the failure to find a going-concern buyer. The company had operated 354 U.S. stores at the start of 2025, and management had been searching for a buyer or strategic partner for months without success. Pre-petition store-closing sales began on February 14, 2025 at 236 locations, with the remaining 118 locations starting closings on February 27, 2025. The Chapter 11 filing on March 16 simply formalized what was already a coordinated wind-down.

All 354 U.S. stores closed by April 30, 2025. International stores, owned by separate licensees, were not part of the Chapter 11 filing and continued to operate. General unsecured creditors recovered between 3% and 6% of their claims, a recovery profile consistent with Forever 21's profile as a multi-year cash burner with limited residual asset value.

The Forever 21 case is a useful example of two structural patterns. First, when a brand sits inside a private-equity-owned operating entity but the IP sits with an affiliated brand-licensing company, bankruptcies can result in the operating entity liquidating while the brand survives and gets re-licensed. Authentic Brands has continued to license the Forever 21 trademark for online sales and may eventually find a new operating partner. Second, the second bankruptcy of a fast-fashion retailer rarely produces a viable going-concern outcome, because the structural pressures (e-commerce displacement, fast-changing consumer preferences, working-capital-intensive operations) compound rather than ease over time.

Joann Stores, the 82-year-old crafts and fabrics retailer, filed for Chapter 11 in January 2025 in the District of Delaware, marking its second bankruptcy in less than a year. The first Joann case had been filed in March 2024 and emerged in April 2024 through a debt-to-equity conversion that left the company controlled by its prepetition lenders. Within six months of emergence, the company was in distress again, with multiple suppliers cutting off shipments and inventory levels at less than half of management's projections through October 2024.

The 2025 case strategy was a Section 363 going-concern auction, with Gordon Brothers (the liquidator that had handled Toys R Us, Party City, and Big Lots) serving as stalking-horse bidder. The auction was held on February 21-22, 2025 at the New York offices of Kirkland & Ellis. The winning bidder was Great American Group, working with the term lenders, in a joint venture with Tiger Group. The bankruptcy court approved the sale on February 26, 2025.

The going-concern auction effectively converted to a liquidation. GA Group was retained as Joann's exclusive agent to monetize substantially all of the company's assets, with going-out-of-business sales beginning at 533 Joann stores. Most stores closed by the end of May 2025, with the remainder shutting in early summer.

The Joann case illustrates a familiar Chapter 22 dynamic: lenders converted debt to equity in the first case expecting operating turnaround, the turnaround failed, and the second case converted what was originally a going-concern restructuring into a liquidation. The economic loss to the lender group across both cases was significant, although the precise recovery percentage depends on how the lenders priced the post-emergence equity in the first case.

The four headline cases were not the only major restructurings of 2025. Five additional cases produced significant restructuring mandates and are worth at least passing familiarity for interview prep:

Taken together, the four cases capture most of the failure modes that defined the 2025 restructuring market:

A few common threads run through all four. First, every case had a meaningful liability management or out-of-court restructuring step that preceded (and failed to prevent) the bankruptcy. First Brands had attempted multiple amend-and-extend transactions before the factoring fraud surfaced. Rite Aid's 2023 emergence was effectively a recapitalization that did not fix the operating model. Forever 21 went through Catalyst Brands restructuring discussions before filing. Joann's first bankruptcy was an out-of-court-style debt-to-equity exchange wrapped in a fast in-court process. The pattern is consistent: out-of-court tools handle some distress, but unsustainable operating models eventually require in-court resolution.

Second, the recoveries are concentrated at the top of the capital stack. Senior secured lenders in all four cases recovered most of their principal, often through credit-bid mechanics or DIP roll-ups. Unsecured creditors recovered between 0% (Rite Aid wind-down) and 6% (Forever 21). Equity was wiped out in every case. This is the standard distribution pattern in liquidation-driven outcomes and is worth knowing as a baseline expectation.

Third, the venue choices reflect the broader 2025 trend. First Brands chose the Southern District of Texas, which fits the broader shift toward Texas as the dominant venue for large filings. Rite Aid and Joann filed in jurisdictions (New Jersey and Delaware respectively) that reflected practical considerations specific to their second filings rather than a strategic preference. Forever 21's New Jersey filing tracked Catalyst Brands' corporate footprint.

These four cases will likely appear in restructuring interview questions for the next two to three years. Beyond the headline data points, candidates should think through the broader implications each case raises. First Brands forces questions about creditor protections in private-credit-funded structures. Rite Aid and Joann force questions about whether the first restructuring fixed the right problem. Forever 21 forces questions about IP carve-outs and operating-entity bankruptcies.

Fourth, the role of advisors split predictably. PJT Partners advised on First Brands creditor-side. Houlihan Lokey took the debtor mandate on Joann. Lazard ran the Rite Aid debtor-side mandate (its second consecutive Rite Aid case). Centerview and FTI Consulting picked up creditor-committee mandates across multiple cases. The mandate split reflects the ongoing patterns where Houlihan Lokey leads in distressed retail, PJT and Evercore split the high-end financial-distress cases, and Lazard works the regulated-industry restructurings (pharmacies, healthcare, utilities). Knowing which advisor worked which side of which case gives interview answers a layer of authority that surface-level case knowledge does not. The next article in this section drills into the sector concentration that produced this case mix.