American Apparel, the Los Angeles clothier that was once a fashion trailblazer, took a drastic step to stave off financial ruin — a move that may still not be enough to save the company.
On Monday, the clothing manufacturer and retailer filed for Chapter 11 bankruptcy protection after reaching a deal with 95% of its secured lenders. The restructuring agreement, which will take the company private and hand nearly 100% control to its largest bondholders, is designed to cut its crippling debts and interest payments.
If approved by the Bankruptcy Court, the deal would also force out most of American Apparel’s shareholders, including founder Dov Charney, who was ousted last year as chief executive and chairman.
Paula Schneider, who came aboard as chief executive in January, said filing for Chapter 11 was “the right decision for the company.”
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