American Apparel's Court Case Closed

American Apparel

THE long, drawn-out battle regarding the future of American Apparel has come to a close, with a Delaware bankruptcy court ruling that the clothing company can emerge from bankruptcy, reports WWD, by following an approved "reorganisation plan".

The ruling means that alternative attempts to regain control of the company by its controversial founder, Dov Charney - who earlier this month was a key proponent in a proposed $300 million takeover offer that would see his reinstatement as an employee of the brand - are redundant. Charney confirmed yesterday that he was "unlikely" to appeal the ruling. 

The plan that American Apparel's board hopes will turn around the fortunes of the retailer involves a $230 million debt-for-equity swap with $40 million in exit financing and a $40 million asset-backed facility.

"This just gives us the opportunity to move forward and not be encumbered by a protracted bankruptcy, so for us it's gone through very quickly in the scheme of things," chief executive officer Paula Schneider told WWD yesterday. "What it does allow is the freedom to move forward now and the ability to have some liquidity that we desperately need and make American Apparel stronger."

Dov Charney

The company does hold potential to press reset, according to California Fashion Association president Ilse Metchek, who said without Charney's involvement "there's nothing in its way except the right voice and getting it out into the right channel".

For Charney's part, he is already planning his next step, as outlined in a statement released yesterday: "At the end of this saga, I, like the many former stockholders, will most likely be left with nothing. Despite that, what gives me great optimism are the things I possess that can't be stolen by a hedge fund - my ideas, values, drive and my passion. To that end I ask that my supporters stay tuned."