American Apparel files for bankruptcy, operations to continue

Mon Oct 5, 2015 6:30pm EDT
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By Supriya Kurane, Sruthi Ramakrishnan and Jeffrey Dastin

(Reuters) - American Apparel Inc, known as much for its sexually charged advertising and controversial founder as for its fashion offerings, filed for Chapter 11 bankruptcy protection on Monday.

The company, which has not made a profit since 2009, joins a growing number of teen retailers that have been unable to adjust to changing spending patterns and intense competition from fast-fashion brands such as H&M, Forever 21 and Inditex's Zara.

The bankruptcy filing could make American Apparel an attractive acquisition target, Lloyd Greif, chief executive of investment bank Greif & Co, said.

There were a lot of private equity firms waiting for the bankruptcy to happen and it allows them to make operational changes that would otherwise be impossible, Greif said.

American Apparel CEO Paula Schneider said the company was not looking to sell at any point soon. "My understanding is that bondholders are interested in owning the company."

Greif said Leonard Green & Partners, Gores Group, Platinum Equity and Sequential Brands Group among others could be potential buyers.

Platinum Equity and Sequential Brands declined to comment, while the rest were not immediately available.

The big loser from the bankruptcy will be founder Dov Charney, who was ousted as CEO in December for alleged misconduct, including misusing company funds and failing to stop a subordinate from creating blog posts that defamed former employees.   Continued...

The American Apparel factory headquarters is pictured in Los Angeles, California July 7, 2014. REUTERS/Jonathan Alcorn