Amazon.com Inc and teen apparel store chain Forever 21 Inc are among the companies weighing offers to buy bankrupt US teen clothing retailer American Apparel, Reuters today reported, citing people familiar with the talks.
Apart from Amazon and Forever 21, California-based apparel maker Next Level Apparel and brand licensor Authentic Brands Group, are in talks with American Apparel and its financial advisers about submitting offers ahead of the Fridaydeadline, the report said.
American Apparel, which had emerged from Chapter 11 bankruptcy in February 2016, had in August hired investment bank Houlihan Lokey Inc to explore a sale. (See: US teen clothing retailer American Apparel explores sale) Struggling with shrinking sales, as well as litigation tied to its founder and ex CEO Dov Charney and with debt of $177 million, Los Angeles-based American Apparel had once again filed for chapter 11 in the US Bankruptcy Court in Delaware last November. (See: American Apparel files for second bankruptcy less than a year after court protection ended) Charney, a Canadian-born artist and industrialist, had in January 2015 teamed up with investor group Hagan Capital Group and Silver Creek Capital Partners to table a $300-million bid for the retailer.
The board of American Apparel rejected the offer saying that the ''debtor's plan is not feasible and will lead to poor long-term recoveries for the company's stakeholders and put thousands of manufacturing jobs in Los Angeles at risk.'' (See: Bankrupt American Apparel rejects $300-mn takeover bid from investor group) Although it has around 250 owned stores worldwide, American Apparel has not made a profit since 2009 and losses over the last five years have topped $340 million, forcing it to raise capital to make ends meet.
The company also had to contend with image problems and had been criticized for its racy advertising and sexually-charged culture.
The board officially fired Charney in December 2014, bringing to a close the saga that started with the board suspending him in June for misconduct.
In their termination move, the directors had cited infractions such as failure to adhere to the chain's sexual harassment policies and using company funds for family members' travel expenses. Charney's lawyer had dismissed the allegations as ''baseless.''
As malls experience slowing sales with more US citizens shopping online, many US retailers are struggling and clothing companies have been hit particularly hard. The last two years had seen Aeropostale Inc, Quiksilver Inc and Pacific Sunwear of California Inc file for bankruptcy.
Any successful offer from Amazon, Forever 21and others would have to top a $66 million stalking horse bid by Canadian apparel maker Gildan Activewear Inc, which American Apparel agreed to when it filed for bankruptcy in November.
Gildan's offer included an option to keep American Apparel's manufacturing plants in southern California, which employ about 3,500 workers.