American Apparel announced plans to file for Chapter 11 bankruptcy late Sunday, ending mounting chatter surrounding the Los Angeles firm and its ability to continue operating.
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American Apparel said the restructuring agreement, which has been approved by its directors, will “substantially” cut its debt and interest payments by eliminating more than $200 million of its bonds in exchange for equity interests in the company.
As it turns out, hiring a CEO who hasn’t been accused of a variety of gross behavior wasn’t enough to revitalize American Apparel. “This restructuring will enable American Apparel to become a stronger, more vibrant company”, the CEO said in a press release.
American Apparel, which has been trying to turnaround its business, has seen falling sales and recorded a loss of $19.4m (£12.8m) in the second quarter. “We are taking this step to keep jobs in the U.S. and preserve the ideals for which the company stands”. This doesn’t come as a surprise-back in August, the company sent out a press release expressing doubts it would stay afloat for another year considering its poor financial health.
According to The Telegraph, chief executive Paula Schneider said: “Throughout the implementation of this process, American Apparel will continue to operate its business without interruption to customers, employees and vendors”. It still needs approvals from the bankruptcy court.
The company listed assets and liabilities of between $100 million and $500 million in its bankruptcy filing.
But the company’s image took a knock as a string of lurid allegations began to emerge against Mr Charney, leaving lawyers handling several sexual harassment cases.
Schneider’s priority has been to revamp the business, which she’s previously cited as the reason for the company’s misfortunes.
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Charney founded the company in Montreal in 1989.
