UPDATED- American Apparel Inc. (NYSE: APP) has finally filed for Chapter 11 bankruptcy protection in an attempt to strip itself of crippling debt. As Mergers & Acquisitions has previously reported, the company has been facing huge problems for more than a year, spanning from the ouster of founder Dov Charney to slumping sales, which the brand blamed on lacking enough products to sell. American Apparel’s woes underscore the many challenges retailers contend with today, including being ‘overstored,’ as Mergers & Acquisitions explored in depth in our October cover story.
The Los Angeles-based retailer, known for t-shirts and $50 spandex leggings, filed a pre-arranged Chapter 11 reorganization plan in the U.S. Bankruptcy Court for the District of Delaware on Oct. 5. American Apparel reached a restructuring support agreement with 95 percent of secured lenders that aims to reduce the company's $300 million in debt by $200 million. Under the deal, American Apparel's lenders (a syndicate that includes New York hedge fund Standard General and others) will provide $90 million in debtor-in-possession loans so that the company can continue operations.