Bankrupt American Apparel rejects $300-mn takeover bid from investor group

Bankrupt US apparel retailer American Apparel Inc has rejected a $300-million takeover bid from a group of investors who are backing the return of the company's founder, Dov Charney, a Canadian-born artist and industrialist.

Earlier this week, investor group Hagan Capital Group and Silver Creek Capital Partners tabled a $300-million bid for the teen apparel retailer.

Their offer included $90 million of new equity and a $40 million term loan and a business plan from Charney, who was fired as CEO in December 2014.

Under the plan, the company would be taken private and will give nearly 100 per cent control of the company to its biggest bondholders.

The investment will be managed by the private equity arm of PressPlay Global, backed by Hagan and Silver Creek.

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,'' the board of American Apparel said as soon as the offer was made.

American Apparel is seeking approval from the Delaware court on 20 January on its current reorganisation plan, which would cut about $200 million of debt. Under this plan, the retailer would be taken over by lenders, including Monarch Alternative Capital, Coliseum Capital and Goldman Sachs Asset Management.

Charney, who founded American Apparel in 1989 and holds a 52-per cent stake, said in December that he was exploring plans to revive the bankrupt company (See: American Apparel said to receive buyout proposal from Irving Place Capital).

The Los Angeles-based company has struggled with shrinking sales, as well as litigation tied to Charney. It filed for chapter 11 in the US Bankruptcy Court in Delaware in October 2015.

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.

Its stock has lost more than 86.8 per cent of its value over the past year.