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Twice in just over a year, American Apparel files for second bankruptcy


11/14/2016


Twice in just over a year, American Apparel files for second bankruptcy
Weighed down by intense competitive pressures facing U.S. teen retailers and a rocky relationship with its founder, American Apparel LLC filed for its second bankruptcy protection in just over a year on Monday.
 
As the retailer struggles to overcome years of losses and rising online competition comes the second bankruptcy. For its racy advertising and mercurial founder, Dov Charney, the company became a part of popular culture.
 
According to a Delaware court filing, American Apparel listed assets and liabilities in the range of $100 million to $500 million, a company that is known as much for its sexually charged advertising.
 
Canadian apparel maker Gildan Activewear Inc agreed to buy certain assets from American Apparel for about $66 million in cash and it agreed to buy intellectual property rights related to the American Apparel brand, the company said in a separate announcement.
 
Gildan will not be purchasing any retail store assets, it said in a statement.
 
American Apparel is allowed to hold an auction for its assets and business under which Gildan's proposed acquisition would constitute the initial bid under the bankruptcy filing.
 
"Gildan has asked for the opportunity to maintain certain of our manufacturing, distribution and warehouse operations in and around Los Angeles," American Apparel Chairman Bradley Scher said in a letter to employees, a copy of which was obtained by Reuters.
 
For American Apparel, this filing will have no noticeable effect on day-to-day operations in the United States and throughout the competitive sale process American Apparel will run its business as usual in the United States, Scher said in the letter.
 
After talks with brand licensor Authentic Brands Group LLC stalled, American Apparel had began discussing a possible sale with brand licensor Sequential Brands Group Inc as well as financial services company B. Riley Financial Inc and has been scouting for a buyer for quite some time now.
 
It was winding down its operations in the UK. The U.S. proceeding - a so-called "Chapter 22," a play on words for a second Chapter 11 - is separate, the company said last week.
 
Following a steep drop in sales and drawn out legal battle with Charney, who was ousted in 2014, American Apparel filed its first bankruptcy in October 2015. Under the ownership of a group of former bondholders led by hedge fund Monarch Alternative Capital LP., it emerged from bankruptcy in February.
 
Exacerbated by its costly manufacturing plant in Los Angeles, still it continued to face declining sales. American Apparel hired investment bank Houlihan Lokey earlier this year to explore a sale under mounting pressure.
 
Any deal keep its manufacturing plant in the United States, the company has insisted.
 
As the spending habits of young people shift and they visit malls less often, in the past two years, at least eight U.S. teen retailers, including Wet Seal LLC and Pacific Sunwear of California Inc, have filed for bankruptcy.
 
The case is in the U.S. Bankruptcy Court for the District of Delaware, case number 16-12551.
 
(Source:www.reuters.com)