American Apparel Has Filed For Bankruptcy In The US

American Apparel Has Filed For Bankruptcy In The US

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by Grazia |

American Apparel has become known as much for its controversial history and the misconduct of former chairman Dov Charney as for its sports luxe fashion. And now the high street store has announced it has filed for chapter 11 bankruptcy protection in the US.

The company has failed to turn a profit since 2009 and with sales dropping 17% in the second quarter of this year, the company has now reached a restructuring deal.

95% of its lenders have agreed to reduce its debts. They will write off $200 million (£131.5 million) of bonds in exchange for equity in the company, meaning the store will cut its debt by more than half and cut its annual interest payments by $20 million (£13.2 million).

Founded by Charney, the company first made a name for itself in the early '90s with its ‘Made in the USA’ policy and high wages for staff. But Charney’s reputation overtook that of the brand’s ethical credentials.

Over-sexualised ad campaigns were followed by numerous charges of misconduct and several sexual harassments lawsuits against Charney by staff.

The board of the company fired him as chairman in June 2014, and then sacked him as chief executive in December, with the cost of defending the brand against lawsuits filed against Charney becoming a rising factor in the company's losses.

The high street chain now hopes to embark on a new era, with Chief executive Paula Schneider saying in a statement: 'This restructuring will enable American Apparel to become a stronger, more vibrant company.'

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