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American Apparel files for Chapter 11 bankruptcy

By Tomas Monzon
American Apparel, a clothing store known for its clothes-free advertising, has filed for Chapter 11 bankruptcy. File photo by Stephen Shaver/UPI
American Apparel, a clothing store known for its clothes-free advertising, has filed for Chapter 11 bankruptcy. File photo by Stephen Shaver/UPI | License Photo

LOS ANGELES, Oct. 5 (UPI) -- Publicly traded clothing company American Apparel announced Monday it's filing for Chapter 11 bankruptcy protection.

The company said retail stores, wholesales and U.S. manufacturing operations will continue to run and international stores are also unaffected by the move.

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American Apparel called the bankruptcy part of a "strategy to revitalize our brand."

More than $200 million in company bonds will be exchanged for equity interests in the company following its restructuring process, which it aims to complete within six months. The bond exchanges and other measures will reduce the company's debt from $300 million to a ceiling of $135 million, in addition to lowering annual interest costs by $20 million.

"This restructuring will enable American Apparel to become a stronger, more vibrant company," CEO Paula Schneider said.

The move follows statements made by the company in August that it was doubtful whether it would stay in business. The company had engaged in a revitalization effort that included shuttering stores and laying off employees as well as addressing lawsuits from former CEO Dov Charney.

Charney was fired from the company twice in 2014 following alleged company mismanagement and sexual harrassment. In return, Charney has hit the company with nearly 20 lawsuits.

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Charney founded American Apparel in 1998, gaining attention for its sexually driven advertising and alternative business practices.

U.S. and international customers, employees and others may call one of two toll-free hotlines for more information about the reorganization effort. U.S. callers may dial +1 (877) 940-7795 and international callers may use +1 (614) 779-0360.

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