American Apparel Sued For Unpaid Bill

A fabric supplier is suing Top 40 firm American Apparel (asi/35297) over an unpaid bill, highlighting financial concerns amid speculation the supplier may declare bankruptcy. The lawsuit, filed by The Knit House, claims American Apparel has failed to pay $80,955 of a $134,622 order. The New York Post reported that according to the claim, the Los Angeles-based manufacturer has “refused” to pay the outstanding balance of the bill. Neither company has commented on the suit.

In its most recent Q2 sales earnings report, American Apparel hinted at the possibility of running out of cash, declaring in a filing that its weakened financial position raises “substantial doubt” that the company may be able to stay in business. “We believe that we may not have sufficient liquidity necessary to sustain operations for the next twelve months,” the company said in the report.

In August, the supplier had reached an agreement with creditors for an additional $90 million to help the company avoid default. Prior to that, American Apparel had claimed it only had $11-$13 million available in cash – the amount of an interest payment due October 15. Moody’s Investor Services had cut the apparel company’s rating even further into junk territory, calling American Apparel’s financial situation “untenable.”

According to the Post, sources close to The Knit House said American Apparel’s vendors are worried that the company will file for bankruptcy protection, leaving the fabric firm unable to claim the outstanding amount on its bill.