Judge Picks American Apparel’s Bankruptcy Plan Over Founder Dov Charney’s Buyout Bid
Instead, U.S. Bankruptcy Judge Brendan Shannon’s ruling gives hedge funds like Monarch Alternative Capital the okay to control American Apparel and its more than 200 stores when it exits Chapter 11, reports Reuters.
The L.A. company filed for bankruptcy in October after having problems coming up with financing and struggling under a heavy debt load.
The approved plan will cut $200 million of debt and infuse the company with some much-needed cash. The company expects to be in the black by 2018. It hasn’t been profitable since 2009.
Charney had argued last week during a two-day trial that the company needed his creative talents to turn things around, calling out American Apparel’s sinking sales and inability to turn a profit since he was fired in December 2014.
Judge Shannon said he didn’t doubt that Charney and his investment pals were serious with their takeover bid, but that the company isn’t obligated to sell itself when it has a bankruptcy exit plan that has been approved by all classes of creditors.
The retailer’s board of directors turned down Charney and pals’ $300 million offer earlier this month.
Charney posted a lengthy statement on Medium, saying he’s “obviously disappointed by the judge’s decision,” and outlined why he thinks his offer should’ve been approved over the debtors’ reorganization plan.
“While outside observers might not yet appreciate it, I believe the path being followed by the company’s management is a road to ruin,” Charney writes, citing “plummeting sales” and other financial markers.
“The sad reality is that American Apparel, the largest garment manufacturer in the United States, will not survive at this pace and I don’t believe the current management has the talent to bring it back to health.”
Judge approves American Apparel bankruptcy exit plan [Reuters]
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