The fashion chain, which operates more than 800 stores across the US, Europe, Asia and Latin America, wants to secure a potential debtor-in-possession loan to take the company into Chapter 11 bankruptcy.

Such a move, reported by Bloomberg, would allow it close unprofitable stores and recapitalise, in a mechanism that is similar to the company voluntary arrangements (CVA) being used by retailers in the UK.

Forever 21’s cash is dwindling and, although it has been working with advisers in a bid to secure new funding and restructure its debt, the business has struggled to win over potential lenders.