American Apparel Says Manufacturing To Remain In US

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American Apparel is not giving up on the USA. The iconic American apparel firm has no plan to stop the U.S.-based manufacturing of its clothes despite the company’s financial problems and ongoing turnaround effort, according to attorney Scott Greenberg speaking to a bankruptcy judge in court on Tuesday.

Greenberg laid out the firm’s turnaround plan, which is supported by its senior lenders, at the initial hearing in its chapter 11 bankruptcy case on Monday.

As a part of the proposed reorganization plan, American Apparel will be getting a cash infusion to allow the firm to rebuild the business. Creditors will receive significant equity in the reorganized company.

Moreover, Greenberg noted the turnaround will not lead to widespread closings of American Apparel’s more than 230 stores, and will stand by its pledge to produce all of its clothing in the United States.

The comments from the company’s lawyer were in response to question from Judge Brendan Shannon, who is presiding over American Apparel’s chapter 11 proceeding in U.S. Bankruptcy Court in Wilmington.

More on American Apparel bankruptcy

American Apparel has been involved in a high-profile battle with ex-chief exec Dov Charney, who was removed as CEO last year over claims of inappropriate conduct. Charney denies all allegations of improper behavior at the workplace.

According to court filings, the new management team has a strategic plan to turn around the beleaguered clothing retailer, including the streamlining product offerings and maximizing the brand value. Furthermore, the new executives were being held back by insufficient cash to execute their plan, and bankers and others were wary of trying to bail out American Apparel.

American Apparel was in serious financial trouble by fall of this year, and went into default on its senior loan.

Major shareholder Standard General and other investors decided to buy out the senior debt, and ponied up extra cash to finance the reorganization. The $60 million the investors are already owed has been rolled into a $90 million bankruptcy loan for American Apparel. The financing was granted tentative approval from Judge Shannon Tuesday, and will give the firm close to $30 million for continued operations and to carry out the new marketing strategy.

Statement from the judge

“It’s not a typical brand. In a lot of ways it’s a cultural decision,” Judge Shannon noted in American Apparel’s initial bankruptcy proceedings earlier this week. “The commitment to American textile manufacturing is hardly typical and is, I assume, part of the message and part of the DNA that the company seeks to share, communicate and rely upon.”

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