$200-million takeover bid would bring Dov Charney back to American Apparel

Troubled retailer American Apparel Inc. has received a takeover bid of more than $200 million from an investor -- part of a plan that would return ousted Chief Executive Dov Charney back to the company, according to a person familiar with the situation.

The Los Angeles clothing manufacturer, which filed for Chapter 11 protection in October, is set to emerge from bankruptcy this month. The reorganization plan submitted at the time of the bankruptcy filing would take the company private and hand nearly 100% control to its largest bondholders.

This takeover bid could complicate the proceedings. The deal, which was submitted in late December, would return Charney to American Apparel in a senior role, the person said.

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Charney was fired in 2014 as chief executive and chairman after an investigation into alleged inappropriate behavior with employees and misuse of company funds. Since then, he has been fighting to regain control of the company he founded.

Charney announced in December that he had hired Cardinal Advisors to help explore options with potential investors. It was the first indication that Charney may try to offer an alternative plan in Bankruptcy Court.

Cardinal Advisors declined to comment.

American Apparel said in a statement that it “evaluates all bids consistently.”

“The company remains focused on the completion of its financial restructuring following its planned Bankruptcy Court hearing at the end of this month,” the statement said.

The takeover bid will be competing against the reorganization plan, which already has the approval of 95% of its secured lenders. But existing shareholders, including Charney, would be left with nothing.

Under that agreement, more than $200 million in bonds would be eliminated in exchange for shares in the reorganized company — a transaction known as a debt-for-equity swap. The participating lenders are led by Monarch Alternative Capital.

Charney argued in a motion filed in Bankruptcy Court on Thursday that the alternative bid would “provide meaningful increases in cash and liquidity” when American Apparel emerges from bankruptcy, and also offer more money to unsecured creditors.

He also argued that American Apparel’s lenders failed to provide enough time for potential investors to complete due diligence. A potential investor was never even contacted by the lender’s advisors, the filing said.

Moelis & Co., the investment bank that is advising on potential offers, has said that American Apparel could be valued between $180 million and $270 million. But that estimate assumed the company, which has been fighting years of sales declines, would reach certain financial goals.

Follow Shan Li on Twitter: @ByShanLi

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