American Apparel Solicits Fashion Revival under Bankruptcy

Published Date : Oct 07, 2015

American Apparel Inc. is planning to rebuild its struggling fashion business with the help of a restructuring plan. Under the plan, the ownership of the company will be enjoyed by the Standard General hedge fund. This is the same hedge fund that rescued RadioShack earlier in the year, as commented by a source close to the company.

American Apparel Inc., which is the largest ‘Made in the U.S.A.’ brand in the country earlier in the week has filed for bankruptcy protection. The company is grappling with excess inventory, debt, and millions of legal liabilities that are tied to the founder of the company.

The company that is known for its sexually charged advertising and skin-hugging clothing, is trying for a traditional turnaround with the help of its bondholders, rather than carrying out auctioning of assets for cash flow.

However, the company is in the initial stages for an operational turnaround, as commented by the retailer’s attorney to the U.S. Bankruptcy Judge. This was commented at a court hearing which was conducted to approve US$90 mn financing that the company has plead for bills payment.

Under the same plan, other high profile hedge funds such as Monarch Alternative Capital played a major role in the bankruptcy of Blockbuster, which is a movie rental chain. The movie rental chain will be provided US$ 70 mn of capital in the next six months.

American Apparel will also receive liquidity from senior bondholders of the company, which will aid to hire new talent in the pursuit to bolster internet sales. This will give the company a chance to rebuild the brand and receive a fresh look for its product line, which rarely ever changed in the past from season to season.

Unlike Blockbuster and RadioShack, whose business model were obsolete, the restricting of American Apparel is expected to be rewarding for the hedge funds