American Apparel Files for Second Bankruptcy

Los Angeles-based retailer American Apparel recently filed for Chapter 11 bankruptcy. The November 7th filing was the second for the beleaguered chain, after a recent attempt to turn the company around failed. The company emerged from bankruptcy protection in February 2016, less than a year before filing again.

 

According to a court filing, Canadian manufacturer Gildan Activewear has agreed to take over intellectual property rights, assets and inventory from the company as part of a $66 million deal. Interestingly, the deal does not include purchasing any of American Apparel’s physical stores, suggesting that they will have to be auctioned off in the near future.

 

Gildan’s plan is to integrate the company’s brand into their own printwear business. Court filings suggest that they’re interested in acquiring some of the company’s Los Angeles-based manufacturing and distribution operations. Currently, these facilities are located in downtown Los Angeles, South Gate, Garden Grove and La Mirada.

 

In recent years, American Apparel has struggled with performance problems, making it increasingly difficult for them to stay afloat. After their first bankruptcy, it soon became apparent that they would not be able to raise enough money to complete their turnaround. They soon found themselves borrowing from the same former bondholders who had taken control during the first bankruptcy.

 

Customers are unlikely to notice anything different about their day-to-day operations until either the stores are sold off or someone comes along with a better offer than Gildan’s. If the proposed deal does go through, American Apparel will continue to live on as a highly-recognized brand sold through various other retailers.