Will American Apparel File for Bankruptcy?

Companies and Brands

Published: July 27, 2015 8:16 am

Last Updated: April 28, 2020 10:28 am

Trendy clothing maker American Apparel Inc. (NYSEMKT: APP) faces a $15.4 million debt repayment bill in October and there is some question about whether or not the company will be able to make the payment. The apparel maker is expected to announce quarterly results in about two weeks, and we might get an answer then.

At the end of April the company had about $21 million in cash, including a fresh loan for $15 million from hedge fund backer Standard General. According to a report at the New York Post, an unnamed source said that the company is “burning through cash and likely has less than $10 million on hand.”

Raising the necessary cash is problematic. Shareholders rejected a management proposal to issue more shares. The company has already filed a report saying that it cannot guarantee that it will have enough financing to meet its commitments and that raising the cash is not a cinch.

American Apparel has been sued by founder and former CEO Dov Charney and the legal costs are eating into cash as well. Standard General, in a countersuit against Charney filed earlier this month accused the former CEO of campaigning to reduce the value of the shares he ceded control to.

Charney is the company’s largest shareholder, but voting control of the shares were passed to Standard General last year. Again according to the NYPost, Charney is trying to round-up investors to help him buy back the company if it should fall into bankruptcy.

Shares closed at $0.255 on Friday in a 52-week range of $0.24 to $1.20

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