No Likely Holiday Happiness for American Apparel

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Less than a year after emerging from bankruptcy, American Apparel Inc. (NYSE: APP) may not survive the coming holiday season without filing for a second bankruptcy. When the company emerged from bankruptcy in February former bondholders, led by Monarch Alternative Capital, were in charge.

The company had its moment in the limelight several years ago when it employed nearly 4,000 American workers in making the clothes it sold in its retail stores. Throughout most of 2014 the company’s founder and CEO Dov Charney fought to keep both the company afloat and his job.

Charney was removed as CEO although he remained the company’s largest shareholder. His stock, however, was controlled by a hedge fund — Standard General — that lent the firm $25 million to pay other outstanding debt.

Shareholders rejected a management proposal to issue more shares. Then Charney sued the company y and the legal costs are eating into cash as well. Standard General then sued Charney in July of 2015 accusing him of campaigning to reduce the value of the shares he ceded control to. American Apparel finally filed for bankruptcy protection in October 2015.

Bloomberg News reported in mid-October that there may be potential buyers for the American Apparel brand and its wholesale unit, but the fate of about 200 retail outlets is unclear. The company hired Paula Schneider as CEO to replace Charney, but she left the firm in September and general counsel Chelsea Grayson has taken over.

A report Wednesday morning in the New York Post indicated that the company may shut down all its Los Angeles manufacturing facility altogether or it may move to another state where it could contract the manufacturing operations.

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