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Two months after American Apparel admitted it didn’t have enough financing to continue operations for another year, the retailer says things haven’t gotten better and it’s filed for Chapter 11 bankruptcy.
American Apparel stores and manufacturing operations are expected to continue to operate normally under a restructuring deal the company has reached with most of its lenders, Reuters reports.
The Los Angeles-based company says its first plan of action is to cut its $300 million in debt by nearly $200 million through the elimination of bonds in exchange for equity.
It was unclear if the company intends to eventually shutter some stores as a result of the filing. The company previously announced in July that it would close some locations as part of a $30 million cost-cutting turnaround effort.
Filing for bankruptcy is just the latest stumbling block for the apparel company that has seen its fair share of controversy in the last two years. Recent issues – including dealing with the behavior and subsequent lawsuits involving company founder and ex-CEO Dov Charney – have only exacerbated its financial problems.
Reuters reported Monday that Charney’s 42% stake in the company – which was held as collateral by New York hedge fund Standard General LP – will be wiped out.
American Apparel has reportedly lost money every year since 2010. In August, the company estimates that it lost $19 million in just the past quarter, bringing its total loss of the year, so far, to $46 million – double its losses from the year before.
American Apparel files for bankruptcy, operations to continue [Reuters]
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