American Apparel plans to revamp its struggling fashion business under a restructuring plan that would give ownership to the Standard General hedge fund, which rescued RadioShack earlier this year, lawyers said at a hearing on Tuesday.
American Apparel, the country's largest "Made in the U.S.A" brand, filed on Monday for Chapter 11 bankruptcy protection. The company is saddled by debt, excess inventory and millions of legal liabilities tied to its founder Dov Charney.
Known for its sexually charged advertising and tight T-shirts, the retailer is attempting a traditional turnaround under the control of its bondholders, rather than auctioning off assets.
"American Apparel is in the early stages of an operating turnaround," the retailer's attorney, Scott Greenberg of Jones Day, told U.S. Bankruptcy Judge Brendan Shannon at a hearing to approve $90 million in financing to pay bills, including wages.