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American Apparel Files for Bankruptcy

    American Apparel follows Quicksilver and other teen brands into bankruptcy

    American Apparel files for bankruptcy - US Bankruptcy courthouse building in Tallahassee Florida

    In August, American Apparel acknowledged that bankruptcy is any option.  In filings with the Securities and Exchange Commission, the Los Angeles Times reported that the Los Angeles based American Apparel is warning that they do not expect to have the money to run the company over the next 12 months.  American Apparel has been losing money over the last five years.  According to the New York Post, “A Chapter 11 filing is not out of the question, the company all but acknowledged in a regulatory filing.”

    On Monday, October 5, American Apparel filed for Chapter 11 protection.  Amid the fast fashion trend, many retailers are finding it difficult to keep up.  Unfortunately for American Apparel and many other teen retailers, stores such as Forever 21 and H&M bring runway fashion to their stores within weeks.

    American Apparel is buying some time in order to revamp its stores under Chief Executive Paula Schneider who plans to change the entire look of American Apparel while maintaining its brand.  According to records American Apparel owes over $300 million.  The bankruptcy plan will help reduce its debt to $135 million.  Per the deal, bondholders will swap the debt owed by American Apparel for shares in the company.  This deal will put the the creditors in full control of the company.

    Since fast fashion has been taking over, in the past year alone, In the past year, Wet Seal, Deb Shops, Delia’s and Body Central have all gone under.  The New York Post states that American Apparel’s shares have dropped 76 percent over the past year to 21 cents.  In the last quarter the company had a loss of about 19.4 million.  To make matters worse, the founder and previous CEO is filing lawsuits against the American Apparel.  Additionally, there is labor unrest related to the firing for apparently organizing their co-workers and union against the company.