The Real Deal on The American Apparel Bankruptcy Deal

by San Antonio Attorney

After bankruptcy, American Apparel is ready to move forward.

Two weeks ago, American Apparel filed for bankruptcy, stating a staggering amount $300 million in losses over the past few years.

American Apparel stated that a dozen of its more than 5,000 styles represented the vast majority of sales, as stated in the bankruptcy filing.

The legal representatives mapped out American Apparel’s endurance that provided $10 million while the executives fix inventory problems in various outlets, according to Daily Bankruptcy Review.

The Los Angeles based firm plans to exit bankruptcy with a $30 million loan, resulting from a lesser load of debt, according to a plan filed in court last Thursday.

The fashion line’s ownership will go to its senior creditors and over $200 million in senior bond debt will be exchanged for ownership of the restructured clothing retailer under the reorganization plan.

There is also a plan of withdrawing American Apparel’s stock such as the trades under APPCQ in OTC markets.  The share price of the company, which peaked at $15.80 in 2007, dipped to 11 cents per share right before the bankruptcy filing in October.

The unsecured creditors of the fashion line that are owed close to $150 million will split up any legal proceeds won by the firm following bankruptcy.  American Apparel creditors can still vote to reject the new reorganization plan.  There was a request that the judge should set the deadline of voting up to January 7 for the restructured plan. Both consumers and employees should not be alarmed though since no store closing will occur after the restructuring plan.  A process of negotiations is taking place for cheaper leases and executives are also requesting the bankruptcy court to declare some real estate contracts null and void.

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