a negative impact on sales. Without the provocative branding, American Apparel appeared to be
just another underwear company. Schneider left the
company in September.
Gildan’s spokesman told the Times that the company
would like to continue manufacturing in the U.S., but
not necessarily in LA. The two companies also have
conflicting brand images. While American Apparel’s
advertising featured half-dressed models in compromising positions, Gildan recently engaged wholesome
Grammy-winning singer Blake Shelton to do a TV
commercial for underwear — fully clothed.
Charney has not totally given up. He insists that the
company failed because he was forced out. He is suing
American Apparel and Standard General. At the same
time, he has started a second act with a new factory in
South Central LA. He hired 40 workers, who still get
minimum wage or more, and once again he’s shipping
wholesale T-shirts and underwear. He is courting investors, and in September, he told Forbes he had obtained
a $10 million ABL facility. He has a new website called
“That’s Los Angeles by Dov Charney” featuring photos
of South Central LA and an opportunity to sign up for
an email list.
Stay tuned for the next episode! abfj
NADINE BONNER is editor of ABF Journal.
Encina Enters the Fray
The plan allowed American Apparel to exit Chapter 11
in February 2016 — only six months after filing. Encina
was not yet open for business, and current Senior
Managing Director Bill Kearney was still with CIT when
American Apparel approached CIT for assistance.
“We could not do it,” Kearney says. “ Nor could any
of the other bank ABL shops. They went ahead with the
exit, and the stockholders provided some financing for
them. After the exit, they went after some lenders to get
By that time, Kearney had left CIT for Encina
Business Credit, which was on the lookout for these
“messy deals,” as Encina CEO Marty Battaglia told ABF
Journal in an interview. Encina submitted a proposal for
$30 million in financing and won the deal.
“The facility that they were looking for in the spring
was really just exit financing that they didn’t get when
they exited in February. So technically, it was not exit
financing because they had already completed bankruptcy,” Kearney explains. Encina completed its due
diligence, but the deal never closed.
Then, on October 25, 2016 American Apparel came
back on the wings of Houlihan Lokey, the investment
bank the company hired when it planned to reenter
Chapter 11. Encina was asked to submit another
proposal, which was easier this time around since
Kearney’s team had already completed the due diligence.
“That happens pretty often in this space,” Kearney
says. “A deal comes along, and it doesn’t go through —
but a few months later, it comes back.”
Encina received approval by November 4, about a
week after the company received the request. American
Apparel filed Chapter 11 for the second time on
Kearney said the company did not draw anything
at closing. “Over the next weeks and months, we will
fund administrative claims, working capital needs and
expenses,” Kearney predicts. Canadian underwear
manufacturer Gildan made a $66 million stalking horse
bid to purchase the clothing brands, the inventory and
possibly the factories in November, so Kearney was
confident that the loan would be repaid. At the January
auction, both Amazon and Forever21 emerged as
competing bidders, but Gildan took the prize with an
$88 million bid. The Canadian company is not interested in the 110 retail stores, and the future of the Los
Angeles operations are uncertain. More than 3,000
employees were laid off.
Kearney declines to speculate on the reasons behind
American Apparel’s rollercoaster trips into Chapter 11.
In December, Marc Weinstein, the chief restructuring
officer, told the Los Angeles Times that the company’s
turnaround plan had failed. “The company faced unfavorable market conditions that were more persistent
and widespread than the debtors anticipated when they
emerged from the first bankruptcy,” he told the reporter.
He also told Bloomberg that CEO Schneider had
dialed back the racy marketing, which may have had
Encina’s Bill Kearney declines to speculate on the reasons behind
American Apparel’s rollercoaster trips into Chapter 11. In December,
Marc Weinstein, the chief restructuring officer, told the Los Angeles
Times that the company’s turnaround plan had failed. “The company
faced unfavorable market conditions that were more persistent and
widespread than the debtors anticipated when they emerged from
the first bankruptcy,” he told the reporter.
American Apparel Timeline
1988 – Dov Charney starts American Apparel in his college dorm room
1997 – Charney starts a factory in LA to manufacturer T-shirts wholesale for imprint
2003 – American Apparel opens its first retail store
2007 – American Apparel goes public
2009 – Immigration Services raids the American Apparel factory, costing 1,800 workers
2009 – American Apparel makes a profit for the last time
2014 – Dov Charney is removed by the board as president and CEO
2015 – October, American Apparel files Chapter 11
2016 – February, the company exits Chapter 11, Charney fails in bid to return
2016 – September, CEO Paula Schneider leaves the company
2016 – November, American Apparel files Chapter 11 for the second time