For the second time in less than a year, clothing maker American Apparel filed for bankruptcy protection Monday morning after selling its intellectual property rights, including the name, to Canada’s Gildan Activewear for about $66 million in cash.
The Wall Street Journal reported that the company has arranged $30 million in bankruptcy financing. The acquisition of American Apparel’s brand is expected to close in the first quarter of 2017.
Founder and ousted CEO Dov Charney tried and failed to regain control of American Apparel prior to the previous bankruptcy proceeding. Whether he will try again to regain his company is unknown, but such a move is not inconceivable.
Gildan will purchase some existing inventory, but the Canadian company said in an announcement of its own that it “will not be purchasing any retail store assets.” American Apparel owns about 200 retail outlets.
If the bankruptcy court requires American Apparel to hold an auction for its assets and business, the Gildan offer will become the stalking horse bid. If Gildan loses such an auction, it will be entitled to an unspecified breakup fee and other expense reimbursements.
In a press release today, Gildan said:
The acquisition will create revenue growth opportunities by leveraging Gildan’s extensive distribution network in North American and international printwear markets to further increase the brand’s penetration in the faster growing fashion basics segments of these markets. In addition, with American Apparel’s strong heritage as a consumer brand, the Company will evaluate potential wholesale opportunities for leveraging the brand within its Branded Apparel business.