Dov Charney Fights to Regain Control of American Apparel in Bankruptcy Court

by San Antonio Attorney

Dov Charney, American Apparel’s former CEO, is currently embroiled in a bitter dispute with the bankruptcy court.  Both parties faced off in a goal to gaining favor from the judge that each of their plans will be of the best interest of the Los Angeles Company along with its creditors.

Charney gave an investor group support such as the Hagan Capital Group.  This group recently submitted two takeover offers in the past few months, which includes a $300-million bid, rejected last week by the American Apparel’s board.

The Hagan group revealed its interest in restoring Charney as CEO to the company.  Charney was fired last 2014 ensuing an investigation that unraveled allegations of company fund misuse and displaying a negative code of conduct with employees.

The new CEO Paula Schneider, who took over the company last year, made a testimony last Wednesday regarding the board’s decision to reject the offer since the creditors did not provide support and predicted that the company would be ridden with debt.

This will be the last chance Charney will have in order to regain control of the company.  Chad Hagan, the managing partner of the Hagan Capital Group revealed in a deposition that he has no intentions to sue American Apparel and the bondholders for the personal interest of taking over the company.

Following the reorganization statement, more than $200 million in bonds will be erased in exchange for shares of American Apparel.  This is popularly known as a debt for equity swap.  The involved lenders include hedge fund Monarch Alternative Capital.  The new owners of American Apparel will face a lot of challenges as the company’s profit has not alleviate its problems since 2009.  Recent reports cite that the retailer reported a net loss of $14.5 million.

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