The longwinded tussle between American Apparel and its controversial founder and former CEO, Dov Charney, has taken another twist. American Apparel has received a $300 million buyout offer from an investor group backed by Charney, comprised of Hagan Capital Group and Silver Creek Capital Partners.
In an effort to climb out of a deep financial hole, American Apparel implemented a financial restructuring plan in which its lenders would commit $200 million to the retailer in a debt-for-equity swap. As part of the financing, bondholders swap their debt for shares in the company, taking ownership of the retailer and effectively eliminating its shareholders.
For the investor group’s $300 million bid to go through, one of these two options must occur:
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American Apparel’s five affiliated debtors must accept the deal prior to the incumbent plan’s approval hearing on January 20, 2016; or
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Charney and the interested acquirers will have to convince the bankruptcy judge that their offer benefits creditors and shareholders more than the incumbent plan.
With the retailer having filed for Chapter 11 bankruptcy protection in October 2015, the idea of a $300 million clean slate could be an enticing prospect, particularly considering the retailer hasn’t made an annual profit since 2009. This also represents a last ditch effort for Charney to win back the company that he built through his creative image.
If the bid succeeds, Charney would return to the company that ousted him in December 2014 for alleged misconduct amid sexual harassment claims, which he has since denied. It is unknown what position Charney would hold upon a potential return.
While the retailer has unanimously approved its reorganization plan, the investor group of Hagan Capital Group and Silver Creek Capital Partners has deemed its own offer as “superior” to the plan.
