American Apparel files for bankruptcy

Troubled fashion retailer says it will operate the business through restructuring

Troubled teen apparel retailer American Apparel filed for voluntary chapter 11 bankruptcy protection on Monday and said it had reached a restructuring support agreement with most of its secured lenders.

American Apparel said it would continue to operate its business throughout the process with its retail stores, wholesale and US manufacturing operations continuing without interruption. The retailer said it expects to cut its debt to $135 million from $300 million, as the restructuring will eliminate more than $200 million of bonds in exchange for equity in the reorganised company.

"By improving our financial footing, we will be able to refocus our business efforts on the execution of our turnaround strategy," chief executive Paula Schneider said in a statement. Under the restructuring agreement, American Apparel's secured lenders will provide about $90 million in debtor-in-possession financing, the company said.

American Apparel, founded in 1989 by Dov Charney whose 'Made in America' mantra found huge favor among young shoppers, has been in disarray after it fired Charney in December for alleged misconduct. Charney has since filed several lawsuits against the company, alleging defamation and breach of employment contract. The Los Angeles-based retailer, known for making its products in the United States, has not turned a profit since 2009.


In August, the company raised going concern doubts, saying it may not have enough capital to sustain operations for the next 12 months as losses widened and cash flows turned negative.

American Apparel said it expects to complete the restructuring within six months. The case is in US Bankruptcy Court, District of Delaware, Case No: 15-12055.