American Apparel emerges from Chapter 11 bankruptcy as private company

By Caroline Salls

Pittsburgh, Feb. 5 – American Apparel, LLC emerged from Chapter 11 bankruptcy Friday as a private company after implementing its plan of reorganization, according to a company news release.

The plan was approved by the U.S. Bankruptcy Court for the District of Delaware on Jan. 27.

American Apparel said its reorganization plan converted about $230 million of bonds into equity in the company and provided for the infusion of $40 million of exit capital and a commitment for a $40 million asset-backed loan.

The company said these sources of incremental liquidity will serve as vital support to its turnaround plan, and interest expense will decrease by $20 million as compared to the period before American Apparel’s Chapter 11 case.

Under the reorganization plan, the company also converted its corporate form to a Delaware limited liability company from a Delaware corporation and, therefore, is now known as American Apparel, LLC.

As previously reported, debtor-in-possession financing claims will be paid in cash, with the balance converted into exit financing.

Holders of general unsecured claims will receive a share of litigation trust units and, if they voted as a class to accept the plan, a general unsecured creditor support payment, which will be paid in installments for one year after the plan effective date.

Interest holders will receive no distributions.

“This is the start of a new day at American Apparel,” chief executive officer Paula Schneider said in the release.

“With the enormous debt burden removed, we can now turn our full attention to our strategic turnaround, which will benefit our customers, vendors and employees.

“Our strategy will focus on: designing fresh products and merchandising; launching new partnerships to grow the e-commerce platform; unveiling progressive advertising and marketing campaigns; investing in brick-and-mortar retail locations in more promising areas; and implementing rigorous planning and forecasting for timely product deliveries and to streamline excess inventory.”

American Apparel’s legal adviser in connection with the restructuring was Jones Day. FTI Consulting served as its restructuring adviser. Milbank, Tweed, Hadley & McCloy LLP was the legal adviser to the bondholders, and Ducera Partners LLC served as restructuring adviser.

American Apparel, a Los Angeles-based manufacturer, distributor and retailer of branded fashion basic apparel, filed for bankruptcy on Oct. 5. The Chapter 11 case number is 15-12055.

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