American Apparel Files for Chapter 11 Bankruptcy

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American Apparel filed for Chapter 11 bankruptcy on Monday following a rocky period in which its made-in-the-U.S. model faltered and its controversial CEO became embroiled in controversy over his behavior in the workplace.

The embattled retailer said it has already reached agreements with creditors representing 95 percent of its secured debts to execute a restructuring plan that would allow the company to maintain operations.

The deal, which would require a court’s approval, will allow the company to “continue to operate its business without interruption to customers, employees and vendors,” American Apparel said in a statement.

It was not immediately clear whether the company plans to cut stores or employees.

American Apparel has about 8,500 employees at six factories and 230 stories in the U.S. and 17 countries. The company famously bet its business model on fashionable and edgy clothing made in the U.S. In a court filing, it said it has about 4,600 employees in Los Angeles and the L.A. area.

The company listed $199.3 million in assets and $397.6 million in debt. The retailer has procured $90 million in bankruptcy filing from its secured creditors.

The company said it plans to complete a debt-for-equity exchange, converting $200 million senior secured notes into stock

Under the proposed restructuring plan, unsecured creditors would receive cash from a litigation trust and a $1 million cash payment, according to the filing.

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SOURCE: Nathan Bomey
USA TODAY