Los Angeles—American Apparel, the Made-in-USA retailer that went bankrupt last fall, announced today that its creditors approved its reorganization plan. Coincidentally, the retailer got a $300 million buyout offer backed by ex-CEO/Founder Dov Charney who was ousted from his post last year.
Hagan Capital Group and Silver Creek Capital Partners said their offer is a better one than reorganization plan. Their bid would give the struggling retailer $130 million, including $90 million of new equity and $40 million of a new term loan. American Apparel could then exit bankruptcy with approximately $160 million of liquidity and new equity, the investors said.
Under today’s announced reorganization, American Apparel would swap out some $200 million worth of debt for equity, “effectively wiping out shareholders” of which Charney is the biggest.
“This is an important step forward in emerging from our restructuring process as a stronger, more vibrant company,” said CEO Paula Schneider about the plan. “We are gratified to have reached this agreement with our Creditors’ Committee and to have achieved this consensus from our unsecured creditors, and we would like to thank them for their support. We remain focused on executing our turnaround plan, and positioning American Apparel for the future by creating new and relevant products, launching new design and merchandising initiatives, growing our e-commerce business, and creating exciting and creative marketing campaigns to share the story of our progress.”
American Apparel would obtain the foregoing commitment for $40 million of additional exit capital, which is in addition to the $40 million of new capital previously committed by the Committee of Lead Lenders.
The bid to take over American Apparel would have to be decided soon, however, since the U.S. Bankruptcy Court for the District of Delaware will hold a hearing to confirm the reorganization plan on Jan. 20.
“American Apparel evaluates all bids consistently, and in the ordinary course. The company remains focused on pursuing the completion of its financial restructuring following its planned bankruptcy court hearing at the end of this month,” a spokesperson for American Apparel said.
In December, Charney said he hired Cardinal Advisors to help him line up investors.
Chad Hagan, managing partner of Hagan Capital, who had said Charney’s ouster was a shortsighted mistake,” noted that American Apparel remains a “viable business model that needs to be scaled from a sales point of view and should not be in bankruptcy.”