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Uh Oh: American Apparel Files for Bankruptcy

American Apparel

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It's official: American Apparel has filed for bankruptcy. The LA Times reports that the Downtown-based brand announced the much-expected news late Sunday and that it plans on spending the next six months—and $70 million in debtor-in-possession financing—restructuring the company.

CEO Paula Schneider, who'll stay on during the bankruptcy, calls the move "the right decision for the company. She tells the paper that "she had cash flow restrictions every day. We were making choices every day of funding retail or wholesale or ecommerce," she reveals. "[Then] let's layer on all the nuisance lawsuits that cost millions of dollars. We had no liquidity and that's what led us to the decision."

The restructuring will allow American Apparel to continue manufacturing in the US and keep its recently-downsized HQ and factory open; Schneider also reveals that no layoffs are planned and that a handful of stores in underperforming areas will shutter.

The paper reports that "if bankruptcy court appeals the filing, American Apparel's creditors will take full control, and current shareholders, including founder Dov Charney, will be pushed out. Bankruptcy proceedings would also temporarily delay the many lawsuits filed against AA," like its former CEO's anti-defamation suit.