Wilmington, DE—Ousted American Apparel CEO/Founder Dov Charney made what could be his final attempt to wrestle back the bankrupt Made-in-the-USA apparel and accessories retailer.
Speaking at bankruptcy court here, Charney, whose $300 million takeover bid with Hagan Capital Group and Silver Creek Capital Partners was rejected,
In what press reports termed “an animated” statement, Charney told the court that he had been a victim of corporate raiders when he was fired in 2014.
“There was a plan behind the scenes to steal the company from me,” Charney said. “Since then, it’s been a constant hide-the-ball.”
“I’m a merchant, I’m a creative artist, I’m a photographer, I’m a marketer, I’m an industrialist,” Charney said, adding: “I don’t want to hand over my company. This is coercion.”
American Apparel is seeking approval for its plan to take the company out of bankruptcy under the control of hedge fund investors, including Standard General and Monarch Alternative Capital.
Awaiting Judge’s Decision
U.S. Bankruptcy Judge Brendan Shannon must decide if the hedge fund-backed plan, which received the backing of a committee of the company’s creditors, is “fair and feasible.”
In her testimony before the court, CEO Paula Schneider said Charney and his partners bid was rejected by the board because it would add too much debt and because the retailer’s lenders opposed the offer.
Schneider also testified that she found the company in disarray following Charney’s firing. Noting that Charney help a tight grip and final say over all aspects of the business, Schneider said there were too many managers answering to Charney.
“More than 70 people told me they reported to Dov,” Schneider said, noting the solution was to “get people to get into their own lanes that we had to develop.”
Schneider also noted that she changed American Apparel’s provocative advertisements—ones that got Charney into hot water—in favor of more low key, toned down images. In Europe, the company faced lawsuits over its ads and Facebook wouldn’t allow them, cutting into Internet sales, she said.
One of the major obstacles facing the Charney-backed bid is that even if the judge approves it, American Apparel would then need to try to force Hagan’s offer on lenders and lower-ranking creditors. That would take four months and require Charney and the hedge to pay off a $90 million loan that matures in February. They would also have to provide $40 million to $50 million more for the company to use while it pushes for approval of the new proposal, according to the court documents..
While this battle continues, retail analyst Burt Flickinger said the best option for American Apparel, whose stock is trading at 3 cents, would be quick court approval of the current bankruptcy plan given the deteriorating retail environment.
“Every day and week of delay adds viability risk to the plan,” said Flickinger, who is managing director of retail consultancy Strategic Resource Group.