American Apparel files for second
bankruptcy in just over a year
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[November 14, 2016]
By Jessica DiNapoli
NEW YORK (Reuters) - American Apparel LLC
filed for its second bankruptcy protection in just over a year on
Monday, weighed down by intense competitive pressures facing U.S. teen
retailers and a rocky relationship with its founder.
The second bankruptcy comes as the retailer struggles to overcome years
of losses and rising online competition. The company became a part of
popular culture for its racy advertising and mercurial founder, Dov
American Apparel, known as much for its sexually charged advertising,
listed assets and liabilities in the range of $100 million to $500
million, according to a Delaware court filing.
Separately, Canadian apparel maker Gildan Activewear Inc said it agreed
to buy intellectual property rights related to the American Apparel
brand and certain assets from American Apparel for about $66 million in
Gildan will not be purchasing any retail store assets, it said in a
The bankruptcy filing allows American Apparel to hold an auction for its
assets and business under which Gildan's proposed acquisition would
constitute the initial bid.
"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.
Throughout the competitive sale process, American Apparel will run its
business as usual in the United States and this will have no noticeable
effect on day-to-day operations in the United States, Scher said in the
American Apparel has been scouting for a buyer, and began discussing a
possible sale with brand licensor Sequential Brands Group Inc as well as
financial services company B. Riley Financial Inc after talks with brand
licensor Authentic Brands Group LLC stalled.
The company said last week 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.
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An American Apparel store logo is pictured on a building along the
Lincoln Road Mall in Miami Beach, Florida March 17, 2016.
American Apparel filed its first bankruptcy in October 2015
following a steep drop in sales and drawn out legal battle with
Charney, who was ousted in 2014. It emerged from bankruptcy in
February under the ownership of a group of former bondholders led by
hedge fund Monarch Alternative Capital LP.
Still, it continued to face declining sales, exacerbated by its
costly manufacturing plant in Los Angeles. Under mounting pressure,
American Apparel hired investment bank Houlihan Lokey earlier this
year to explore a sale. [L1N1AY224]
The company has insisted that any deal keep its manufacturing plant
in the United States.
At least eight U.S. teen retailers, including Wet Seal LLC and
Pacific Sunwear of California Inc, have filed for bankruptcy in the
past two years, as the spending habits of young people shift and
they visit malls less often.
The case is in the U.S. Bankruptcy Court for the District of
Delaware, case number 16-12551.
(Reporting by Jessica DiNapoli in New York; Additional reporting by
Tom Hals in Delaware and Rama Venkat Raman in Bengaluru; Editing by
Edwina Gibbs and Gopakumar Warrier)
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