Los Angeles—After a tumultuous few months and a last chance try by former Chairman/CEO Dov Charney to return to its helm, American Apparel said Friday it has emerged from chapter 11 as a private company after successfully implementing its plan of reorganization, one approved by the Delaware bankruptcy court on January 27.
American Apparel filed for Chapter 11 bankruptcy protection in October, after struggling with poor sales and losses amid a protracted conflict with Charney, who has filed a number of lawsuits against the company. Charney accused executives of conspiring against him after he was fired in 2014 amid allegations of his misconduct.
Under American Apparel’s reorganization plan, the company’s secured lenders will convert $230 million of bonds into equity, provide $40 million of exit capital and a commit to a $40 million asset-backed loan. American Apparel said these sources of incremental liquidity will serve as vital support to its turnaround plan, and interest expense will decrease by $20 million.
‘Turn Attention to Turnaround’
“I’m pleased to announce that our plan of reorganization, which was supported by our unsecured creditors’ committee and our bondholders, unanimously accepted by our voting creditors and confirmed by the court, has now enabled us to emerge from bankruptcy in just a few short months,” said Schneider. “With the enormous debt burden removed, we can now turn our full attention to our strategic turnaround, which will benefit our customers, vendors and employees.”
Schneider said the company will focus on “designing fresh products and merchandising; launching new partnerships to grow the e-commerce platform; unveiling progressive advertising and marketing campaigns; investing in brick-and-mortar retail locations in more promising areas; and implementing rigorous planning and forecasting for timely product deliveries and to streamline excess inventory.”
American Apparel’s reorganization plan converted about $230 million of bonds into equity in the specialty retailer and provided for the infusion of $40 million of exit capital and a commitment for a $40 million asset-backed loan. These sources of incremental liquidity will serve as vital support to the company’s turnaround plan, and interest expense will decrease by $20 million as compared to the period before the company’s chapter 11 case. Under the reorganization plan, the company also converted its corporate form from a Delaware corporation to a Delaware limited liability company and, therefore, is now known as American Apparel, LLC.
American Apparel has a toll-free reorganization hotline, accessible at: +1 (877) 940-7795. Customers, employees, or other interested parties who may have questions related to the reorganization may call this hotline for more information.