American Apparel, one of the country's largest apparel brand, filed for Chapter 11 bankruptcy protection on Monday, October 5. The company is struggling by the amount of excess inventory, huge debts, employee strife and legal liabilities of Dov Charney, its ousted founder.
The U.S. Bankruptcy Court in the Disctrict of Delaware is taking care of the American Apparel case with case number, 15-12055. Apparent its bankruptcy filing, the $20.5 million worth of shares were suspended from trading on Tuesday.
However, amidst the bankruptcy verge, the company is still hopeful to get a turnaround of events under a restructuring plan that would give the ownership to Standard General hedge fund under a debt-for-equity conversion. Bondholders will swap their debt for certain number of shares in the company.
As of the moment, the creditors will have full control over the company. Shareholders like Charney who founded it in 1989 will be wiped out.
Under the said restructuring plan, other hedge funds such as Monarch Alternative Capital will provide $70 million new capital over the next 6 months. Monarch also played a role in the bankruptcy of the movie rental chain, Blockbuster. And it seems that the company has no plans of abandoning its commitment to US-based manufacturing of its clothing line as part of the said plan.
"American Apparel is in the early stages of an operating turnaround," the retailer's attorney, Scott Greenberg of Jones Day, told U.S. Bankruptcy Judge Brendan Shannon at a hearing to approve $90 million in financing to pay bills, including wages. (Reuters)
The capital to be acquired will help American Apparel hire new people to help them rebuild the brand by giving its never-changing product line an all new vibe and boost internet sales, as the company said in its filing.
The retailing company looks forward to get new products into the US market before the holiday season in December. It also added that it is keeping its California manufacturing base.
Do you think American Apparel would be able to kickstart from the fall?
