American Apparel Board ‘Just Says No’ To Charney Supporters

Dov Charney’s plan to return to the fold of the company he founded has been blocked by American Apparel.

Los Angeles Times recently reported that the board of American Apparel Inc. has rejected a $300 million buyout plan from investors that supported Charney.

The outlet notes that the rejection of the current bid is not necessarily the end of the road for the investor group — consisting of Hagan Capital Group and Silver Creek Capital Partners — in its designs on American Apparel (the same group, the L.A. Times story points out, had previously submitted a $200 million bid in December). However, time is of the essence if it plans to make another offer.

Should American Apparel gain approval from a bankruptcy court judge for a reorganization plan that the company submitted when it filed for bankruptcy in October, the company would go private, and almost 100 percent control of it would go to its largest bondholders. That decision is expected to be made, L.A. Times adds, on Jan. 20.

In making his (and perhaps Charney’s) case that the investment group’s plan is superior to American Apparel’s own restructuring proposal, Chad Hagan, managing partner at Hagan Capital Group, has attested (via L.A. Times) that under his group’s plan, senior lenders in American Apparel would fully recover their money, while the other plan would regain them 33 to 77 percent. Another contrast put forth by the Hagan/Silver Creek group is that, were it to buy out American Apparel, unsecured creditors would get $10 million to split, while the reorganization plan would bring them $2.5 million.

Analysts have told L.A. Times that the twice-rejected investment group could potentially attempt to gain the support of the aforementioned unsecured creditors of American Apparel and persuade the bankruptcy court judge to postpone making a final decision regarding American Apparel’s reorganization plan until he has examined the new offer.