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Here’s How American Apparel Plans to Turn Itself Around

American Apparel bankruptcy

One day after American Apparel filed for Chapter 11, the Los Angeles-based clothing maker’s lawyer, Scott Greenberg, revealed to a Delaware bankruptcy court that its turnaround plan involves hedge fund Standard General taking ownership of the company.

The struggling chain said Monday that its retail stores, wholesale and U.S. manufacturing operations would continue to operate as normal under a restructuring deal reached with 95 percent of its secured lenders that would reduce its debt from $300 million to $135 million.

“American Apparel is in the early stages of an operating turnaround,” Greenberg told U.S. Bankruptcy Judge Brendan Shannon at Tuesday’s hearing to approve $90 million in debtor-in-possession (DIP) financing provided by Standard General and other hedge funds to pay bills (including wages), according to Reuters.

Under the plan, the investors will also provide as much as $70 million of new capital to support the reorganization and recapitalization of the business over the next six months, such as hiring new talent to increase online sales. In addition, the retailer plans to keep its manufacturing base in California.

“By improving our financial footing, we will be able to refocus our business efforts on the execution of our turnaround strategy as we look to create new and relevant products, launch new design and merchandising initiatives, invest in new stores, grow our e-commerce business and create captivating new marketing campaigns that will help drive our business forward,” CEO Paula Schneider said in a statement.

Known for its racy ads and hipster aesthetic, American Apparel has not turned a profit since 2009.

In August, the retailer warned investors that due to tumbling sales, as well as legal problems tied to the firing of founder Dov Charney last December, it didn’t have enough cash to see it through the next 12 months.

Common stock in American Apparel was suspended from trading on Tuesday ahead of its delisting from NYSE MKT.

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