AMERICAN APPAREL MOVES FORWARD WITH REORGANIZATION PLAN
American Apparel, Inc. has obtained unanimous approval of all voting classes to accept its reorganization plan, a significant step forward that will enable the company to continue implementation of its current turnaround strategy under the existing leadership team.
The company and its five affiliated debtors, the official committee of unsecured creditors and the committee of lead lenders (holders of over 90 percent of the company’s senior secured notes) have reached an agreement, subject to definitive documentation, on the key terms of an amended plan of reorganization. The plan features a commitment for an additional $40 million of capital, through an asset-based credit facility from a third party lender or the committee of lead lenders.
“This is an important step forward in emerging from our restructuring process as a stronger, more vibrant company,” said American Apparel CEO Paula Schneider. “We are gratified to have reached this agreement with our Creditors’ Committee and to have achieved this consensus from our unsecured creditors, and we would like to thank them for their support. We remain focused on executing our turnaround plan, and positioning American Apparel for the future by creating new and relevant products, launching new design and merchandising initiatives, growing our e-commerce business, and creating exciting and creative marketing campaigns to share the story of our progress.”
This agreement’s key terms include unsecured creditors will receive their pro rata share of $2.5 million, a 150 percent increase from the payment that was provided for in the prior chapter 11 plan; the holders of the company’s senior secured notes have agreed to waive their rights to receive this cash distribution on account of their unsecured deficiency claims; and the funding of the litigation trust established for the benefit of unsecured creditors will be increased to $500,000.
“This vote marks a significant milestone in the revitalization of American Apparel,” said Andrew J. Herenstein, co-founder of Monarch Alternative Capital LP. “We are very pleased that we were able to reach this agreement with the unsecured creditors committee, and look forward to working with vendors, landlords, and all our stakeholders to build a better and stronger American Apparel.”
American Apparel will file the amended plan in the coming days, and will seek approval at the plan confirmation hearing currently scheduled for 10 a.m. Eastern time on January 20, 2016 before the U.S. Bankruptcy Court for the District of Delaware.
