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American Apparel Exits Bankruptcy

Following court approval of its reorganization plan, American Apparel (asi/35297) has emerged from Chapter 11 bankruptcy and is now a private company. The supplier has converted approximately $230 million in debt into equity and will receive $40 million in exit capital and can access a $40 million loan. “This is the start of a new day at American Apparel," said CEO Paula Schneider.

Shares of its publicly traded stock no longer have value, including those of founder and primary shareholder Dov Charney. Under the plan, American Apparel has converted to a limited liability company and will be known as American Apparel, LLC.

In a statement, the supplier said its new liquidity “will serve as vital support to the Company's turnaround plan,” highlighting the fact that its interest expenses will decrease by $20 million as a result of the bankruptcy. "With the enormous debt burden removed,” Schneider said, “we can now turn our full attention to our strategic turnaround, which will benefit our customers, vendors and employees.”

American Apparel listed its next major steps, including updating its product line and streamlining inventory, growing its e-commerce platform and unveiling “progressive” advertising campaigns. Even though the company closed 29 retail stores last year, it stated it would plan to invest in brick-and-mortar stores in “more promising areas.” "This is our year for stabilization," Schneider told CNBC.

On January 25, a Delaware bankruptcy court judge approved American Apparel’s plan to hand over control of the company to Monarch Alternative Capital and other bondholders in exchange for a reduction in debt. The plan had been supported by the company’s bondholders and unsecured creditors. Backed by an investor group, Charney had submitted a $300 million offer to buy back the company he started, but the judge ultimately supported American Apparel’s proposed reorganization.

Customers or interested parties with questions about American Apparel’s reorganization can call a toll-free hotline: (877) 940-7795 for the U.S. and (614) 779-0360 for international callers.