Los Angeles-based American Apparel Inc. announced today that the U.S. Bankruptcy Court for the District of Delaware has approved its reorganization plan, setting the stage for the company to emerge from Chapter 11 and become a privately held entity.
"This is a new day for the company, and a positive outcome for our customers, vendors and employees," said CEO Paula Schneider.
"With this milestone behind us, we are now fully focused on executing our turnaround strategy as we continue working to drive revenue across our wholesale, retail and e-commerce businesses; create innovative, new and relevant products; launch new design and merchandising initiatives; and continue to deliver innovative and inclusive award-winning marketing campaigns," she said.
Once the reorganization plan becomes effective, secured lenders will convert $230 million of secured debt into equity, provide $40 million of exit financing in the form of debt and equity, and supply a $40 million asset-backed loan, according to the company.
"This $80 million of incremental liquidity will support the turnaround plan, and interest expense will decrease by $20 million. Additionally, the company will become privately held," the statement said.
Earlier this month, American Apparel rejected a $300 million takeover bid from investors who supported the return of ousted founder and CEO Dov Charney.