A bankruptcy court judge has approved American Apparel’s Chapter 11 exit strategy, officially taking the company private and handing majority ownership to the retailer’s lenders. The retailer is expected to emerge from bankruptcy shortly after the plan’s confirmation, according to The Wall Street Journal.
Notably, the approval marks the end of Founder and former CEO Dov Charney’s quest to return to American Apparel, culminating a yearlong back-and-forth struggle since Charney was ousted in Dec. 2014.
Judge Brendan Shannon approved the plan following a two-day hearing in U.S. Bankruptcy Court in Wilmington, Del., where the court heard the testimony of Paula Schneider, the current CEO of American Apparel, and Mark Weinsten, the retailer’s Chief Restructuring Officer.
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The exit strategy had been unanimously approved by creditors nearly two weeks ago. As part of the plan, the company will swap $230 million in debt-for-equity with bondholders, wiping out all stakeholders including Charney, who still held a 40% stake in the retailer.
American Apparel’s bondholders include Standard General LP, Monarch Alternative Capital LP, Goldman Sachs Asset Management LP and Pentwater Capital Management LP.
Schneider said the company will go forward with its turnaround plan to cut costs and refocus design efforts, all while preserving its U.S. manufacturing operations.
The American Apparel Board of Directors rejected a recent $300 million buyout proposal from an investment group backing Charney in his attempt to return to the retailer. The investment group was comprised of Hagan Capital Group and Silver Creek Capital Partners.
Charney does not plan to appeal the ruling, saying that he lacks the money to do so, according to the Los Angeles Times. He does, however, plan on creating a new apparel venture in the future with the financial backing of Hagan Capital.
