American Apparel Files for Bankruptcy in USA

American Apparel has filed for bankruptcy protection on October 5.

The Los Angeles-based clothing chain, which has been plagued by plunging sales, high debts and several management crises, said it had agreed a deal to restructure its finances.

The company has been involved in a drawn-out legal battle with its founder Dov Charney over misconduct claims.

American Apparel runs 260 shops and concessions in 19 countries.

The retailer, which has been trying to turn around its business, recorded a loss of $19.4 million in Q2 2015.

Photo American Apparel

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

Under the restructuring agreement, American Apparel’s secured lenders will provide about $90 million in financing, the company said.

It expects to cut its debt to $135 million from $300 million through the restructuring, with the program set to be completed within six months.

The company said it would continue to operate its retail stores, and its wholesale and US manufacturing operations throughout the process.

American Apparel, known for making its products in the US, has not turned a profit since 2009.

In August, the company flagged up problems with its finances, saying it might not have enough capital to keep operations going for the next 12 months as losses widened and cash flows turned negative.

American Apparel was founded in 1989 by Canadian Dov Charney. The company fired Dov Charney in December 2014 over misconduct claims, and in June it was granted a restraining order against him.