American Apparel LLC plans to file its second bankruptcy in just over a year as soon as Monday, weighed down by intense competitive pressures facing U.S. teen retailers and a rocky relationship with its founder, according to people familiar with the matter.
A second bankruptcy would come as the retailer struggles to overcome years of losses and rising online competition. The company became a part of popular culture for its racy advertising and mercurial founder, Montreal-born Dov Charney.
American Apparel has been trying to find a buyer for the company, and began discussing a possible sale with brand licensor Sequential Brands Group Inc and financial services company B. Riley Financial Inc after talks with brand licensor Authentic Brands Group LLC stalled.
It could not be immediately determined if American Apparel has found a buyer. If it files for bankruptcy without a buyer in hand, it will look for one through a court-supervised process, a source has previously said. American Apparel declined to comment.
The sources, who cautioned that the bankruptcy plans may change or be delayed, asked not to be identified because the information was confidential.
The company said last week it was winding down its operations in the UK. The U.S. proceeding — a so-called “Chapter 22,” a play on words for a second Chapter 11 — would be separate.
American Apparel filed its first bankruptcy in 2015 following a steep drop in sales and drawn out legal battle with Charney, who was ousted in 2014. It emerged from bankruptcy in February under the ownership of a group of former bondholders led by hedge fund Monarch Alternative Capital LP.
Still, the company continued to face declining sales, exacerbated by its costly manufacturing plant in Los Angeles. Under mounting pressure, American Apparel hired investment bank Houlihan Lokey earlier this year to explore a sale.
The company has insisted that any deal keep its manufacturing plant in the U.S.
At least eight U.S. teen retailers, including Áeropostale, Wet Seal LLC and Pacific Sunwear of California Inc, have filed for bankruptcy in the past two years, as the spending habits of young people shift and they visit malls less often.
Article source: http://www.cbc.ca/news/business/american-apparel-bankruptcy-1.3849474?cmp=rss