Embattled clothing company American Apparel filed for Chapter 11 bankruptcy protection on Monday.
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American Apparel plans to restructure its debt, and creditors have committed $70 million of new capital to support the reorganization and recapitalization of the business, the company said.
– American Apparel, Inc., (the Company) (NYSE MKT: APP), a vertically-integrated manufacturer, distributor, and retailer of branded fashion-basic apparel, announced today that it has reached a restructuring support agreement with 95% of its secured lenders to implement a pre-arranged financial restructuring.
The stock has dropped so low – hovering about 16 cents a share – that the New York Stock Exchange sent notice to American Apparel last month that the company did not meet its continued listing standards, according to a filing with the Securities and Exchange Commission. The deal would reduce its $300 million debt to no more than $135 million, and cut its annual interest expense by $20 million, the statement added.
The company said retail stores, wholesale and US manufacturing operations would continue without interruption and global stores weren’t affected. It was clear whether stores would shut down.
American Apparel expects to complete the restructuring within about six months.
That includes founder Dov Charney, who was ousted from his position as chairmen and CEO in June 2014.
Charney has since filed several lawsuits against the company, alleging defamation, representation in false light and claims for securities fraud.
Paula Schneider, the new chief executive officer, has been trying to overhaul the company by streamlining product offerings and cutting costs. The company’s net loss for the same period widened from $16.2 million in the year-ago period to $19.4 million in red ink.
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American Apparel has also dealt with numerous protests from unhappy workers and a slew of lawsuits from employees, investors and Charney.
