American Apparel is "being sold to an undisclosed buyer," but UK and European arms are not part of sale, and are "likely to be wound down," according to administrators for the company’s British operations. The Los Angeles-based brand, which was founded by controversial figure Dov Charney in 1989 and has become famous for its provocative ads and its domestically-manufactured clothing, brought in accountants from British firm, KPMG to sell off the 13 shops it runs in the UK.
Jim Tucker and Richard Beard, the newly-appointed joint administrators for American Apparel, said no lay offs have been made in connection with American Apparel’s the UK business, which employs just under 200 people. They noted that the stores continue to run as usual until the end of the holiday season.
Jim Tucker, joint KPMG administrator, added: "The American Apparel group has been experiencing strong retail headwinds, which has culminated in the US parent deciding to stop inventory shipments to the UK. The UK business has experienced similar trading difficulties, resulting in the appointment of administrators.”
Meanwhile, American Apparel has resumed talks with at least two potential bidders, after bankruptcy sale negotiations with brand licensor Authentic Brands Group LLC stalled earlier this week, a source close to the company said on Tuesday. American Apparel is looking for a buyer as it prepares for its second bankruptcy in as many years; its first bankruptcy filing in October 2015.
American Apparel is in talks to be sold to a number of licensing firms in a complicated U.S. deal that may mean the business would have seek redemption in front of bankruptcy courts yet again. A second round of bankruptcy proceedings would allow any buyer of the Los Angeles company to avoid tens of millions of dollars in liabilities, including leases for around 140 stores in the United States and Canada. The company is discussing a bankruptcy sale to brand licensor Sequential Brands Group and financial services company B. Riley Financial, among others, the source said.
American Apparel had been close to agreeing to a sale to Authentic Brands earlier this week and it remains interested, according to a Reuters source. If American Apparel does not come to an agreement with a buyer, it will file for bankruptcy and run a sale process after. Any potential deal to sell its business in the United States must ensure that American Apparel continues to manufacture in that country, despite cheaper alternatives overseas, per Reuters.
American Apparel hired investment bank Houlihan Lokey earlier this year to explore a sale, months after emerging from Chapter 11 bankruptcy. Like many teen clothing retailers, it has struggled as young shoppers increasingly prefer to buy their clothes online and at fast fashion retailers including Zara.
The company has also had a difficult relationship with its founder, former chief executive Dov Charney, who was fired in 2014 for allegedly misusing company funds and failing to stop a subordinate from defaming former employees. He later made a failed attempt to buy back the company.
American Apparel has been owned by its former bondholders, a group of hedge funds led by Monarch Alternative Capital LP, since emerging from its first bankruptcy. B. Riley planned to acquire another beleaguered teen clothing retailer, Wet Seal, in its bankruptcy last year, but was outbid by Versa Capital Management LLC. Sequential's brand portfolio includes denim line Joe's Jeans and merchandising company Martha Stewart Living Omnimedia Inc. At least eight U.S. teen clothing retailers, including Aeropostale and Pacific Sunwear of California Inc, have filed for bankruptcy in the past two years.