After dodging a takeover bid from investors aligned with founder and former CEO Dov Charney, American Apparel’s restructuring plan was confirmed Monday by the U.S. Bankruptcy Court for the District of Delaware.
Once the prearranged plan of reorganization becomes effective, the company’s secured lenders will convert $230 million of secured debt into equity, provide $40 million of exit financing (in the form of debt and equity) and provide a $40 million asset-backed loan. This $80 million of incremental liquidity will assist the company as it implements new plans and interest expense will decrease by $20 million.
As part of the reorganization, the company will also be taken over by a group of hedge funds, including Monarch Alternative Capital and Standard General.
Paula Schneider, American Apparel CEO, said, “With this milestone behind us, we are now fully focused on executing our turnaround strategy as we continue working to drive revenue across our wholesale, retail and e-commerce businesses; create innovative, new and relevant products; launch new design and merchandising initiatives; and continue to deliver innovative and inclusive award-winning marketing campaigns.”