In a prior post, we noted how Los Angeles based apparel maker American Apparel sought Chapter 11 bankruptcy protection after years of losses and allegations of misconduct from their former CEO Dov Charney. American Apparel filed its petition in October 2015. Fast forward to January, and the ousted CEO is poised to regain his company.
According to a Bloomberg News report, Charney has been working with a group of unnamed investors who reportedly will pledge a great deal of financing so that Charney can return to the company he founded nearly 20 years ago. His role has not yet been clarified, but if he clears an upcoming procedural hurdle, his quest to regain his company may be complete.
Charney recently filed an objection to American Apparel’s current reorganization plan. He insists that his investors have a much better chance to help the company emerge from bankruptcy. Specifically, his plan would provide the company with $170 million in liquidity, which is more than twice the amount estimated by the current plan. Further, his plan does not require financing contingencies and due diligence is nearly complete.
Meanwhile, American Apparel did not comment on the alternative plan, indicating that it evaluates all bids “in the ordinary course.”
Should American Apparel’s creditors approve Charney’s plan, a bankruptcy court judge could make a ruling this month. If the creditors reject the plan, Charney and his investors must persuade the court to reject the current plan.
The story is emblematic of the need for experienced counsel in the midst of dealing with multiple bids in a Chapter 11 bankruptcy proceeding.