American Apparel Gets Quick OK for $90 Million in Financingby
Judge's permission `clears the runway' for chain to pay bills
Clothing retailer seeking to reorganize after years of losses
American Apparel Inc. won quick court approval to tap into loans of as much as $90 million while it tries to reorganize its finances after years of losses.
The Los Angeles-based clothing maker filed for bankruptcy Monday, plagued by cash-flow problems and the antics of its allegedly wayward founder.
On Tuesday, U.S. Bankruptcy Judge Brendan Shannon in Wilmington, Delaware, gave initial approval to the $90 million in financing, saying it wasn’t typical to move so quickly in a case like this. But, he said, his decision “clears the runway” for the company to start taking care of bills, including payroll. American Apparel employs about 8,500 people at its stores and factories, with about 7,000 workers in the U.S.
American Apparel listed $199.3 million in assets and $397.5 million in debt in its bankruptcy petition. Under a proposal submitted with the filing, more than $200 million of the company’s bonds would be exchanged for stock in the reorganized company. If the court approves the plan, creditors including Monarch Alternative Capital, Coliseum Capital, Pentwater Capital Management, and Goldman Sachs Asset Management will assume ownership.
Dov Charney started American Apparel in 1989. The company played up its “Made in U.S.A.” credentials and also featured young, scantily clad models in its advertising. Charney attracted litigation and scrutiny from regulators for his employment practices and was removed as chief executive officer last year after clashing with the board.
“The press loves this company,” Scott Greenberg, an attorney for American Apparel, told Shannon at Tuesday’s hearing.
The case is In re American Apparel Inc., 15-12055, U.S. Bankruptcy Court, District of Delaware (Wilmington).