Deathwatch: American Apparel file for bankruptcy
We kicked off a Deathwatch for American Apparel earlier this year, and it looks like things are getting progressively worse for the fashion retailer.
Pending a court approval, American Apparel will file for bankruptcy, thanks to persistently falling sales and a load of annoying scandals thanks to their creepy uncle adverts. The company have apparently reached a restructuring deal with 95% of its secured lenders, in a bid to reduce its debts. In short, lenders are looking to write off around £131m of bonds in exchange for equity in the company.
As part of the deal, American Apparel is going to file for chapter 11 bankruptcy protection, according to their own statement.
What hasn't helped the company is the founder, Dov Charney. He managed to ruin the reputation of his own company by ALLEGEDLY being a bit of a perv. It was alleged that he made an 18-year-old sales clerk his "sex slave", jacked-off repeatedly in the presence of a female journalist who was sent to do a piece on him, and he's also sent mucky texts to employees. He got sacked by the company not too long ago and has been cited in a number of sexual harassment lawsuits by former staff.
The cost of defending Charney in lawsuits was just too expensive for the board. Also, people's tastes changed and after the recession, they stopped wanting to buy plain t-shirts for £30.
American Apparel reported a $19.4m loss in the second quarter of this year, which happens to be the company's 10th consecutive quarterly loss and sales were dropping all over the place.
It isn't over yet though. "This restructuring will enable American Apparel to become a stronger, more vibrant company," said chief executive Paula Schneider said in a statement. We'll see.