LOS ANGELES, United States — American Apparel Inc. founder Dov Charney needs a new plan.
U.S. Bankruptcy Judge Brendan Shannon in Wilmington, Delaware, Monday approved a reorganization that hands control of the clothing retailer to senior lenders, rejecting Charney’s alternative proposal and eliminating what may have been his last shot at retaking control of the clothing chain he started as a college student.
Senior lenders including Monarch Alternative Capital LP will trade their debt for control of the retailer, reducing its liabilities by about $200 million. Charney, who was thrown out in 2014, had assembled a group of investors to back his $320 million takeover plan. He claimed a “faithless” board and investors conspired to shut him out.
Los Angeles-based American Apparel filed for creditor protection in October. The company, known for its made-in-U.S.A. branding and racy advertising, posted losses every year since 2010. Its trouble was compounded by allegations of misconduct against the founder, which he denies.
Since his ouster in 2014, Charney has been looking for ways back in. He teamed with Hagan Capital Group and Silver Creek Capital Partners to assemble the alternative takeover offer Shannon rejected Monday.
“There really is not a meaningful alternative on the table,” Shannon said.
The bankruptcy is In re American Apparel Inc., 15-12055, U.S. Bankruptcy Court, District of Delaware (Wilmington).
By Steven Church; editors: Andrew Dunn, Peter Jeffrey.