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American Apparel has filed for bankruptcy in a Hail Mary effort to save the flailing hipster brand.
Crippled by debts, unrest from within and legal troubles following founder Dov Charney's ousting, American Apparel filed for Chapter 11 bankruptcy protection on Monday, reports the L.A. Times. The company has reached a deal with 95% of their lenders for a restructuring that will cut its over $300 million debt, while still keeping their manufacturing in L.A. and their 130 U.S. stores open. But if the deal is approved by a court in Delaware, it also means that shareholders—which includes Charney—will be left with basically nothing. Instead the company will be controlled by its creditors.
"This is a way for all the ills of the company pre-bankruptcy to be cleared in one fell swoop," Lloyd Greif, CEO of L.A. investment banking firm Greif & Co. tells the Times. "By carving away 85% of the debt weighing the company down, you would think American Apparel should be able to survive and prosper."
No layoffs were announced as part of the bankruptcy filing, and the company is expected to continue to operate in the U.S. and abroad, though what comes next for the struggling company remains to be seen. American Apparel's board has given the okay to the restructuring plan, which is said to take place over the next six months, reports KPCC. The bankruptcy would also help clear up debts to vendors that provide raw materials to the company's downtown L.A. manufacturing facility.
