Wilmington, DE—A federal bankruptcy judged today made it official: Dov Charney won’t be returning to American Apparel anytime soon.
Judge Brendan Shannon approved approved a reorganization that hands control of the retailer to senior lenders, rejecting Charney’s alternative proposal and eliminating what may have been his last shot at retaking control of the clothing chain he founded.
Senior lenders including Monarch Alternative Capital LP will trade their debt for control of the retailer, reducing its liabilities by about $200 million. Charney, who was thrown out in 2014, had assembled a group of investors to back his $320 million takeover plan. He claimed a “faithless” board and investors conspired to shut him out last week in testimony.
‘Milestone Behind Us’
Charney had supported an investor group including Hagan Capital Group that submitted two takeover offers in recent months, including a $300-million bid that would have returned Charney to the helm of the Made-in-USA retailer. The American Apparel board of directors had rejected the proposal.
American Apparel filed for bankruptcy protection last October after posting losses in every year since 2010. Of course, it didn’t help either that Charney was accused of misconduct which lead to his ouster in 2014.
The specialty retailer’s troubles are far from over, however. The current management has instituted a turnaround plan In November alone, the retailer reported a net loss of $14.5 million.
Saying that the judge’s decision basically confirmed management’s turnaround plans, CEO Paula Schneider stated: “This is a new day for the Company, and a positive outcome for our customers, vendors and employees. With this milestone behind us, we are now fully focused on executing our turnaround strategy as we continue working to drive revenue across our wholesale, retail and e-commerce businesses; create innovative, new and relevant products; launch new design and merchandising initiatives; and continue to deliver innovative and inclusive award-winning marketing campaigns.”