Dov Charney's Takeover Bid for American Apparel Rejected by Court Ruling

The Los Angeles retailer will become privately held as part of its plans to exit Chapter 11 bankruptcy, leaving Charney with nothing.
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American Apparel storefront in New York City. Photo: Andrew Burton/Getty Images

American Apparel storefront in New York City. Photo: Andrew Burton/Getty Images

On Monday, the U.S. Bankruptcy Court for the District of Delaware issued a ruling approving American Apparel's reorganization plans to exit Chapter 11 bankruptcy, which the Los Angeles retailer filed for in October 2015. This means that Dov Charney's $300-million bid to regain control of the company he founded won't be accepted, according to the Los Angeles Times.

Charney was terminated from American Apparel in 2014 and has been working to get the company back ever since. He sought consulting from financial advising company Cardinal Advisors on "alternative strategic solutions" for American Apparel last December, and also worked alongside Hagan Capital Group and Silver Creek Capital Partners, who were behind Charney's most recent takeover bid earlier this month.

So how does American Apparel plan to bounce back from bankruptcy and remedy its sliding sales (without Charney)? For one, the now publicly traded company will be taken private, leaving full control to the company's bondholders and leaving shareholders (like Charney) with nothing. Hedge fund Monarch Alternative Capital LP will spearhead the company's plans to convert $230 million of secured debt into equity. CEO Paula Schneider's official statement on the matter included plans for new and relevant products, design and merchandising initiatives and innovative marketing campaigns.

However, Charney's battle with the company he founded isn't over. In an email statement provided by Charney to the Los Angeles Times, he said he would continue to pursue litigation against American Apparel and the hedge fund Standard General, with which he first partnered to regain control of the company. From a previous report by the newspaper, Standard General's lawyer could expect a trial in the spring.