American Apparel files for bankruptcy protection

American Apparel filed its second bankruptcy in just over a year on Monday, weighed down by intense competitive pressures facing U.S. teen retailers and a rocky relationship with its founder.

The second bankruptcy comes as the retailer struggles to overcome years of losses and rising online competition. The company became a part of popular culture for its racy advertising and mercurial founder, Dov Charney.

American Apparel listed assets and liabilities in the range of $100 million to $500 million, according to a Delaware court filing.

Separately, Canadian apparel maker Gildan Activewear said on Monday it agreed to buy intellectual property rights related to the American Apparel brand and certain assets from American Apparel for about $66 million in cash.

An American Apparel store in New York.
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Gildan will not be purchasing any retail store assets, it said in a statement.

The bankruptcy court may require American Apparel to hold an auction for its assets and business under which Gildan's proposed acquisition would constitute the initial bid.

American Apparel has been trying to find a buyer for the company, and began discussing a possible sale with brand licensor Sequential Brands Group as well as financial services company B. Riley Financial after talks with brand licensor Authentic Brands Group LLC stalled.

The company said last week it was winding down its operations in the UK. The U.S. proceeding - a so-called "Chapter 22," a play on words for a second Chapter 11 - would be separate.

American Apparel filed its first bankruptcy in 2015 following a steep drop in sales and drawn out legal battle with Charney, who was ousted in 2014. It emerged from bankruptcy in February under the ownership of a group of former bondholders led by hedge fund Monarch Alternative Capital LP.

Still, the company continued to face declining sales, exacerbated by its costly manufacturing plant in Los Angeles. Under mounting pressure, American Apparel hired investment bank Houlihan Lokey earlier this year to explore a sale.

The company has insisted that any deal keep its manufacturing plant in the United States.

At least eight U.S. teen retailers, including Wet Seal LLC and Pacific Sunwear of California Inc, have filed for bankruptcy in the past two years, as the spending habits of young people shift and they visit malls less often.

The case is in the U.S. Bankruptcy Court for the District of Delaware, case number 16-12551.

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