American Apparel has filed for Chapter 11 bankruptcy protection. The move follows a year in which the embattled company has seen store closings and layoffs, and lawsuits from ousted CEO Dov Charney.
The Chapter 11 petition, approved by the board, was filed in federal bankruptcy court in Delaware. The filing followed a deal struck with most of American Apparel’s secured lenders to reduce the retailer’s debt through a process known as a debt-for-equity conversion, where bondholders swap their debt for shares in the company.
The deal, which also includes extra financing from the participating bondholders, would enable American Apparel to keep its manufacturing operations in Los Angeles and its 130 stores in the United States open, the company said. NYT
The bankruptcy filing, which has yet to be approved, would shift control from current shareholders, including Charney, to the company’s many creditors.