American Apparel defends turnaround plan against Charney's bid
By Tom Hals
WILMINGTON, Del. (Reuters) - American Apparel's APPCQ.PK chief executive told a bankruptcy judge on Wednesday the retailer could become embroiled in drawn-out litigation if it accepted a takeover bid being championed by its founder and former CEO Dov Charney.
Los Angeles-based American Apparel Inc, known for its "Made in the U.S.A" fashion and sexually charged advertising, joined other teen-focused retailers by filing for bankruptcy in October due to changing shopping habits.
The company is seeking court approval of a bankruptcy exit plan backed by a group of hedge funds. Charney has objected and is trying to convince the judge a takeover backed by competing investment funds, Hagan Capital Group and Silver Creek Capital Partners, is a better deal.
Last week, the company's board rejected the $300 million takeover bid involving Charney.
U.S. Bankruptcy Judge Brendan Shannon in Wilmington, Delaware, must decide if the hedge fund-backed plan, which has the support of a committee of the company's creditors, is fair and feasible.
CEO Paula Schneider said the support of hedge funds that hold its bonds, including Monarch Alternative Capital, was the most critical factor in determining the best way to end the bankruptcy. She said the support of American Apparel's bondholders was paramount.
"The affiliation with Dov Charney was not a problem," Schneider testified.
Charney's attorney, Steven Kortanek, repeatedly challenged the way the company's investment banker from Moelis, Robert Flachs, reviewed the Charney-Hagan bid. The judge later called the line of questioning "effective." Continued...