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Dov Charney, Founder of American Apparel, Files for Bankruptcy

Dov Charney.
Dov Charney. (Elizabeth Weinberg.)

Dov Charney, founder of the formerly high-flying retailer American Apparel Inc., filed for bankruptcy along with his latest business venture, a vintage clothing store.

Charney was forced into bankruptcy court because he owed $30 million to a hedge fund involved with American Apparel, which shut down all of its outlets and became an online retailer after going through two of its own bankruptcies.

“They’ve been pressuring him,” Charney’s attorney, William N. Lobel, said Friday. “It looks like the best way to handle it at this point is with a bankruptcy.”

While in bankruptcy, Charney will be able to halt any debt-collection efforts while he works out a plan to repay as much as he can.

In the 1990s, Charney built American Apparel into a major retailer known for its made-in-USA marketing and racy advertising. The Los Angeles-based company became publicly traded in 2007 but within a few years, Charney was forced out as the company began losing money. It filed the first of two bankruptcies in 2015.

At its height, American Apparel had more $600 million in sales from hundreds of stores and employed thousands of people, including at a manufacturing plant in California.

Charney made a number of attempts to take back the company but was never able to get the financial backing he needed to close a deal.

In 2017, a Delaware judge ordered Charney to repay $20 million to hedge fund Standard General LP which he borrowed to increase his holdings in American Apparel so he could mount a proxy contest to replace the board that had fired him.

In his bankruptcy petition Friday, Charney listed assets and debts of as much as $50 million each.

His latest venture is Arya’s Vintage Closet, a clothing store in Costa Mesa, California. That company, too, filed for bankruptcy.

Charney plans to reorganise Arya’s while under court protection and arrange a loan to finance the company’s expansion, Lobel said.

The case is In re American Apparel Inc., 15-12055, U.S. Bankruptcy Court, District of Delaware (Wilmington).

By Steven Church.

Learn more:

Dov Charney’s Next Act

Dov Charney is back, with a new company and plenty to say about the state of the fashion industry. But can he shoot down the albatross of his past? Charney speaks exclusively to BoF about what went wrong at American Apparel, his attempts to wrestle back control of the company he built and what he plans to do next.

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