Is This The End Of American Apparel?

Passers-by walk down the street past the American Apparel store in the Shadyside neighborhood of Pittsburgh on Wednesday, July 9, 2014. American Apparel Inc. has reached a preliminary deal with investment firm Standard General to receive $25 million in financing to bolster the clothing chain’s finances, according to a person close to the negotiations.(AP Photo/Keith Srakocic)

This just might be the final straw for American Apparel.
The Los Angeles-based retailer has filed for bankruptcy protection, in an attempt to reorganize its debts. According to the Business of Fashion, the company filed to restructure under Chapter 11 of the U.S. Bankruptcy Code, and the American Apparel received the support of 95 percent of its secured lenders to “implement a pre-packaged reorganization.”

So what does this mean for the company?

American Apparel will write off $200 million of its bonds, in exchange for equity in the company, reducing the company’s total debt to about $135 million. Despite the obvious financial difficulties, American Apparel will not be closing any of its 135 stores, and there were no mentions of layoffs. Instead, it will focus on improving products, cutting costs and rebranding with “positive, inclusive and socially conscious” marketing.

Since 2010, American Apparel has reported yearly losses, totaling $338 million, and in 2015, the company has reported a $92.9 million loss so far. Added with the firing and drawn out legal battle with its controversial CEO Dov Charney, the company has been unable to recover.

So if you are a fan of American Apparel, it is time to stock up on your favorite t-shirts and leggings, because it is a long and difficult road out of Chapter 11.