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American Apparel files for bankruptcy protection

; Reaches Agreement with Lenders to Significantly Reduce its Debt and Interest Payments

American Apparel CEO Paula Schneider


In a statement on Monday, American Apparel said that it had filed for Chapter 11 bankruptcy protection, and that it expected to complete a restructuring within roughly six months.

The company added that the filing with a US court would allow it to implement an agreement with 95% of its secured lenders to implement a pre-arranged financial restructuring.

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The restructuring support agreement will substantially reduce the Company’s debt and interest payments through the elimination of over $200 million from about $300 million, while easing its annual interest bill by $20 million.

Paula Schneider, American Apparel’s Chief Executive Officer, commented, “This restructuring will enable American Apparel to become a stronger, more vibrant company. By improving our financial footing, we will be able to refocus our business efforts on the execution of our turnaround strategy as we look to create new and relevant products, launch new design and merchandising initiatives, invest in new stores, grow our e-commerce business, and create captivating new marketing campaigns that will help drive our business forward.”

The Los Angeles-based retailer has not turned a profit since 2009. The company had a close brush with bankruptcy in 2011, when it warned that it would be forced into Chapter 11 if it could not improve its financial performance quickly.

American Apparel was founded in 1989 by Dov Charney. Mr Charney was fired in December over misconduct claims, and in June it was granted a restraining order against him.

Neil Saunders of retail analysis firm Conlumino told BBC that “Bankruptcy protection is, in our view, the only viable option for American Apparel which is crippled by $311 million of debt and is subject to a number of corporate lawsuits, including those brought by its founder Dov Charney, ” he said.

“Arguably, ” he added, “the big loser will be… Dov Charney, who will not only see his legal proceedings delayed but will also find, along with other shareholders, his holding in the company – currently worth some $8.2 million – wiped out.”

Shortly after Mr Charney’s departure American Apparel has had a number of bid offers, including from private equity. However, the company run a “poison pill” stockholder rights plan to guard against hostile takeovers.

American Apparel completed a merger with Endeavor Acquisition Corp. on December 12, 2007.  Shares at that time touched a high of almost $16, closed down 7 per cent at 11 cents on Friday.


The last two years has been hard on the clothing company American Apparel. Now CEO Paula Schneider Says its business and cash position have deteriorated so badly that it is not even sure it will be able to stay More…

The clothing retailer warned investors they could lose everything if it is unable to raise more money and American Apparel reported another quarter of big losses. American Apparel’s cash problems keep More…

Hedge fund Standard General has sued American Apparel’s ousted Chief Executive Dov Charney for the first time, the latest move in a bitter legal saga that began after he was fired in December. American More…

American Apparel said the $30 million in cost cutting will take place over the next 18 months. The Los Angeles-based retailer did not say how many of its 239 stores would be shuttered or how many its 10, 000 workers More…

Dov Charney and his former firm American Apparel are trading law suits. Charney was the one who fired the first shot in this round of fighting between the two. Will this high profile divorce ever end? More…

A shareholder class-action suit filed on Wednesday accused New York-based hedge fund Standard General of holding American Apparelhostage. Reportedly, it would reap huge benefits if the clothing company declared More…

A former American Apparel finance department employee has alleged the struggling clothing company wrongfully fired him for complaining about the performance of former CFO John Luttrell. In another in More…

American Apparel’s woes are only continuing since the ouster of its founder Dov Charney. just announced the layoff of almost 200 employees, which is, in turn, causing it union problems. The jobs will be More…



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