According to the old adage, you can go home again…unless you are former American Apparel CEO Dov Charney. The ousted CEO recently teamed up with a group of new investors to mount an attempt to take back the company he started nearly 20 years ago. He recently filed a motion objecting to American Apparel’s current reorganization plan and proposing his own, which would provide more than $300 million in financing and ostensibly leave the company in better financial condition after it emerges from bankruptcy.
Despite the large amount of funding, American Apparel’s bond holders and board members rejected the offer. Now Charney and his investors may have to convince a bankruptcy court judge that their plan is best for the company at a plan confirmation hearing scheduled for this week.
According to a recent Wall Street Journal report, Charney’s future involvement with the company was the primary reason it was rejected. As we noted in a prior post, Charney was removed from the company amidst allegations of misuse of corporate funds and sexual harassment. However, the company’s fortunes worsened after Charney’s ouster.
Nevertheless, it is expected that negotiations will continue between Charney’s investors, Hagan Capital Group and Silver Creek Capital Partners. It is expected that Charney’s may be diminished and more capital may be added to the deal in order to make it work. Also, it remains to be seen whether the investors can reach an accord with American Apparel’s creditors.
The story exemplifies the need for solid legal counsel in Chapter 11 bankruptcies. If you have questions about how the lawyers of Shulman Bastian Friedman & Bui LLP can facilitate your bankruptcy, we look forward to speaking with you.