American Apparel has recently filed for bankruptcy protection so it can wipe out most of its debt and reorganize.
The troubled company, which has reportedly not turned a profit since 2009, has been dealing with falling sales, high debts, drawn-out legal battle with ousted chief executive Dov Charney, and other management problems.
The BBC reported that the company has recorded a loss of $19.4 million in the second quarter. According to chief executive Paula Schneider, the restructuring–which is expected to take six months–“will enable American Apparel to become a stronger, more vibrant company.”
The reorganization will make the clothing company’s debt drop from $300 million to $135 million, and will cut the interest bull by $20 million a year.
The restructuring is expected to take six months.
“Throughout the implementation of this process, American Apparel will continue to operate its business without interruption to customers, employees and vendors,” the firm said, adding that the restructuring will take about six months,” said the company.
“By improving our financial footing, we will be able to refocus our business efforts onthe execution of our turnaround strategy,” said Schneider.
The American Apparel firm dismissed Charney in 1989 over alleged misconduct. In turn, Charney is currently suing the company for defamation and fraud.
According to Neil Saunders of retail analysis firm Conlumino, bankruptcy protection is the only remaining viable option for the clotting company. “Arguably, the big loser will be… Dov Charney, who will not only see his legal proceedings delayed but will also find, along with other shareholders, his holding in the company – currently worth some $8.2m – wiped out,” he added.