American Apparel files for bankruptcy protection for second time in just over a year

American Apparel LLC filed for its second bankruptcy protection in just over a year on Monday, weighed down by intense competitive pressures facing U.S. teen retailers and a rocky relationship with its founder.

The second bankruptcy comes as the retailer struggles to overcome years of losses and rising online competition. The company became a part of popular culture for its racy advertising and mercurial founder, Dov Charney.

American Apparel is hoping buyers step up to salvage the rest of its business, according to bankruptcy court papers. However, the only deal the cash-strapped company has in hand is from Canada’s Gildan Activewear Inc., which is offering about $66 million for the intellectual property, some wholesale inventory and an option on manufacturing and distribution assets.

 American Apparel filed its first bankruptcy in October 2015, following a steep drop in sales and a drawn-out legal battle with Mr. Charney, who was ousted in 2014.
The bankruptcy filing allows American Apparel to hold an auction for its assets and business under which Gildan’s proposed acquisition would constitute the initial bid.

“Gildan has asked for the opportunity to maintain certain of our manufacturing, distribution and warehouse operations in and around Los Angeles,”

-American Apparel Chairman Bradley Scher said in a letter to employees, a copy of which was obtained by Reuters.

At least eight U.S. teen retailers, including Wet Seal LLC and Pacific Sunwear of California Inc, have filed for bankruptcy in the past two years, as the spending habits of young people shift and they visit malls less often.

 

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