American Apparel is Reportedly Heading into Bankruptcy Again

by San Antonio Attorney

American Apparel Inc.  is readying to declare bankruptcy again, according to reports.  The clothing company has gone through financial deficit, plummeting sales and a separation with founder Dov Charney.

The Los Angeles-based clothing retailer is expected to file a bankruptcy petition within the next few weeks, based on reports.  It reportedly intends to start the sale process of the company by letting it cancel leases and close some of its retail operations.  Nevertheless, the plan has yet to be finalized and could change since the holiday season is fast approaching.

The company just left from bankruptcy protection in February, when its previous bondholders – headed by Monarch Alternative Capital — assumed the business.  Its plan to save itself by returning to its s roots and concentrates on basic items like skirts and t-shirts was not successful, according reports.  American Apparel also has retained restructuring advisory firm Berkeley Research Group for help, sources say.

There has been no announcement from Monarch about any plans to file for bankruptcy.

The recent years have been endemic with bankruptcies in the retail industry, which include Sports Authority, Aeropostale and Quiksilver Inc.  The brand’s downward spiral is mainly caused by a dramatic shift in spending towards entertainment, technology and experiences.  Consumers do not spend as much on clothing anymore.

The company is currently dealing with turnover of management.  In September, Chief Executive Officer Paula Schneider resigned, and her position was assumed by former acquisitions and mergers attorney Chelsea Grayson.  Schneider is now connected to DG Premium Brands as the new CEO.

Charney, founder and CEO of American Apparel, was booted out two years ago over allegations of misconduct.  He fought hard to take back the business, but he failed.  The company filed for bankruptcy in October 2015.

According to reports, Iconix Brand Group Inc. and Brand licensors Authentic Brands Group LLC want to buy American Apparel.  The negotiations of purchase could set in motion another bankruptcy.

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