Former American Apparel inks global settlement agreement in principle

By Caroline Salls

Pittsburgh, Nov. 27 – APP Winddown, LLC, formerly American Apparel, LLC, reached an agreement in principle with its pre-bankruptcy lenders on the terms of a global settlement that will “move these cases toward their conclusion,” according to a motion filed with the U.S. Bankruptcy Court for the District of Delaware.

APP Winddown said the proposed settlement resolves disputes between the company and the lenders, provides for a prompt interim distribution to the lenders and secures the lenders support, and funding, for a Chapter 11 plan.

“With this final building block in place, the debtors will be positioned to propose and confirm what they anticipate will be a consensual Chapter 11 plan,” the motion said.

Under the settlement, pre-bankruptcy credit facility claims held by non-debtor parties will be allowed and will not be subject to avoidance, reduction, setoff, offset, recoupment, recharacterization, subordination, counterclaims, cross-claims, defenses, disallowance, objection or any other challenges.

The Standard General parties will receive 50% of fee and expense reimbursement cash, 10% of each pre-bankruptcy lender distribution and recovered cash collateral, and lender committee parties will receive 50% of the fee and expense reimbursement cash, 90% of each pre-bankruptcy lender distribution and recovered cash collateral.

On the plan effective date, APP Winddown will reserve from the pre-bankruptcy lender distribution $100,000 to pay the costs related to Workers’ Compensation cash collateral causes of action and $1.5 million to secure a guaranteed amount related to those causes of action.

Also on the effective date, the company will make a distribution to the pre-bankruptcy lenders in an expected amount of roughly $100 million.

The settlement will automatically terminate if the effective date has not occurred by Dec. 21.

American Apparel is a Los Angeles-based manufacturer, distributor and retailer of branded fashion basic apparel. The company filed for bankruptcy on Nov. 14, 2016 under Chapter 11 case number 16-12551.

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