American Apparel on the brink of the abyss

American Apparel on the brink of the abyss

American fashion company American Apparel has filed for Chapter 11, giving it breathing space to work on its restructuring program. Its debt needs to be brought down a lot.

Major negative worth

95 % of the debtors have agreed to work on a restructuring program for the next 6 months. The company currently has 411 million dollars (365 million euro) in liabilities, while it only has 250 million dollars in assets (220 million euro), which means its negative worth has grown to 161 million dollars (145 million euro). Its restructuring plan is designed to help drop its debt from 300 million to 135 million dollars (260 to 120 million euro). 

 

For the past 5 years, American Apparel has been struggling, a slide that worsened when its founder Dov Charney was fired. Immediately after that, he demanded a huge severance package and even went to court to obtain it. In the first half of the year, the company posted a 92.9 million dollar loss (more than 80 million euro).

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