After months of speculation and lead-up, Los Angeles-based American Apparel announced this morning that it has filed for Chapter 11 bankruptcy for the second time in 13 months. The speculation that another company may use that opportunity to purchase it has also come true—Montreal-based Gildan Activewear has purchased the intellectual property rights for American Apparel and some of its assets for about $66 million.
According to Forbes, Gildan Activewear announced the acquisition to its employees this morning.
This hardly is a surprise, especially after American Apparel’s U.K. business went into administration, hiring KPMG to handle the operation.
Forbes also reported that Authentic Brands and Sequential Brands were in talks with American Apparel over a sale, but the talks never came to fruition. They aren’t out of the running, however. Gildan Activewear noted in its letter that with American Apparel’s bankruptcy filing, the company would allow an auction process for another company to propose a better offer and would accept competing offers. If Gildan does, however, finalize the deal, it expects it to happen in the first quarter of 2017. The bankruptcy filing also allows American Apparel to put some of its storefront locations up for auction.
“We’re confident that this decision is the best strategic move forward, in order to preserve the legacy of the American Apparel brand,” Bradley Scher, chairman of American Apparel’s board of directors, said in a letter to employees, according to The Wall Street Journal.
Mark Weinstein, American Apparel’s chief restructuring officer, said in a court filing that market conditions contributed to its proposed turnaround strategy following its initial bankruptcy filing, and that the turnaround strategy “completely failed.”
“The company faced unfavorable market conditions that were more persistent and widespread than the debtors anticipated,” Weinstein said, according to USA Today. “These market conditions were particularly detrimental to retailers.”
Following rumors that American Apparel planned to relocate some of its manufacturing duties away from Los Angeles, Forbes confirmed that Gildan Activewear plans to keep American Apparel’s manufacturing operation located in Los Angeles.
We’ll continue to follow this story as it develops.
