LOS ANGELES, Oct. 5, 2015 /PRNewswire/ -- American
Apparel, Inc., (the Company) (NYSE MKT: APP), a
vertically-integrated manufacturer, distributor, and retailer of
branded fashion-basic apparel, announced today that it has reached
a restructuring support agreement with 95% of its secured lenders
to implement a pre-arranged financial restructuring. This
reorganization will enable the Company to implement a comprehensive
transformation strategy to revitalize the business and brand, while
keeping its production and operations in the U.S. Throughout the
implementation of this process, American Apparel will continue to
operate its business without interruption to customers, employees
and vendors.
The restructuring support agreement, which has been approved by
the Company's board of directors, will substantially reduce the
Company's debt and interest payments through the elimination of
over $200 million of its bonds in
exchange for equity interests in the reorganized Company, and
provide the Company with access to financing during and after its
restructuring. As part of this agreement, American Apparel, and
certain of its domestic subsidiaries have voluntarily filed to
reorganize under Chapter 11 of the U.S. Bankruptcy Code in the U.S.
Bankruptcy Court for the District of Delaware (the "Bankruptcy Court"). The Company
expects to complete the restructuring within approximately six
months.
Paula Schneider, American
Apparel's Chief Executive Officer, commented, "This restructuring
will enable American Apparel to become a stronger, more
vibrant company. By improving our financial footing, we will be
able to refocus our business efforts on the execution of our
turnaround strategy as we look to create new and relevant products,
launch new design and merchandising initiatives, invest in new
stores, grow our e-commerce business, and create captivating new
marketing campaigns that will help drive our business forward."
Under the restructuring support agreement, American Apparel's
secured lenders will provide approximately $90 million in debtor-in-possession (DIP)
financing. These supporting creditors have committed $70 million of new capital to support the
reorganization and recapitalization of the business. The Company
anticipates that such financing will be more than sufficient to
fund its ongoing operations and pave the way for a successful
reorganization. As a result of the reorganization, American
Apparel's debt will be reduced from $300
million to no more than $135
million, and annual interest expense will decrease by
$20 million.
American Apparel has filed with the Bankruptcy Court and expects
to obtain approval for various customary motions for immediate
relief to allow the Company to make certain necessary payments to
employees and suppliers that will permit it to continue operating
without interruption during the initial phase of the restructuring.
The Company will pay all of its suppliers in full under normal
terms for goods and services provided on or after the filing date
of October 5, 2015. American Apparel's international
operations are not affected by the reorganization in the U.S.
Schneider added, "This process will ultimately benefit our
employees, suppliers, customers and valued partners. American
Apparel is not only an iconic clothing brand but also the largest
apparel manufacturer in North
America, and we are taking this step to keep jobs in the
U.S.A. and preserve the ideals for
which the Company stands. In partnership with our bondholders, we
can work towards a new future for the Company and concentrate on
what matters: making and selling great clothing."
The Company plans to continue implementing its strategic plan,
which is focused on improving product selection, cost management,
improving supply chain efficiencies, SKU rationalization,
maximizing retail, e-commerce and wholesale opportunities, while
continuing to create award-winning marketing campaigns that are
positive, inclusive and socially conscious."
American Apparel's legal advisor in connection with the
restructuring is Jones Day. FTI
Consulting serves as its restructuring advisor and Moelis &
Company serves as its investment banker for the restructuring.
The restructuring plan is subject to satisfaction of certain
customary conditions, including approvals by the Bankruptcy Court.
If the restructuring transactions contemplated by the restructuring
support agreement are consummated, the Company's existing common
stock will be extinguished and the holders of the common stock will
not receive any consideration, consistent with legal
priorities.
American Apparel has set up a toll-free reorganization hotline,
accessible to U.S. callers at: +1 (877) 940-7795 and international
callers at +1 (614) 779-0360. Customers, employees, or other
interested parties who may have questions related to the
reorganization may call this hotline for more information. In
addition, court filings and other documents related to the
restructuring are available on a separate website administered by
the Company's claims agent, Garden City Group at
www.gardencitygroup.com/cases/AAI.
About American Apparel
American Apparel, Inc. (the "Company,") is a
vertically-integrated manufacturer, distributor, and retailer of
branded fashion-basic apparel based in downtown Los Angeles,
California. As of September
30, 2015, the Company had approximately 9,000 employees and
operated 227 retail stores in 19 countries including the
United States and Canada. The Company also operates a
global e-commerce site that serves over 50 countries worldwide
at http://www.americanapparel.com. In addition, the Company
operates a leading wholesale business that supplies high-quality
T-shirts and other casual wear to distributors and screen
printers.
This press release, and other statements that the Company may
make, may contain forward-looking statements. Forward-looking
statements are statements that are not historical facts and include
statements regarding, among other things, expectations about the
timing and execution of the Company's restructuring plan, the
Company's future financial condition and future business plans and
expectations, including statements related to the effect of, and
our expectations with respect to, the operation of our business,
adequacy of financial resources and commitments, and the operating
expectations during the pendency of the Company's Chapter 11 cases
and impacts to its business related thereto. Such forward-looking
statements are based upon the current beliefs and expectations of
the Company's management, but are subject to risks and
uncertainties, which could cause actual results and/or the timing
of events to differ materially from those set forth in the
forward-looking statements, including, among others: the risk that
the Company may not be able to consummate the restructuring
transactions contemplated by the restructuring support agreement;
the fact that the transactions contemplated by the restructuring
support agreement, the debtor-in-possession financing agreements
and documents, and the equity commitment agreement are subject to
certain conditions, which conditions may not be satisfied for
various reasons, including for reasons outside of the Company's
control; risks and uncertainties relating to the Chapter 11 cases,
including but not limited to, (i) the Company's ability to obtain
Bankruptcy Court approval with respect to motions in the Chapter 11
cases, (ii) the effects of the Chapter 11 cases on the Company and
on the interests of various constituents, (iii) Bankruptcy Court
rulings in the Chapter 11 cases and the outcome of the Chapter 11
cases in general, (iv) the length of time the Company will operate
under the Chapter 11 cases, (v) risks associated with third-party
motions in the Chapter 11 cases, which may interfere with the
Company's ability to consummate the restructuring transactions
contemplated by the restructuring support agreement, (vi) the
potential adverse effects of the Chapter 11 cases on the Company's
liquidity or results of operations and (vii) increased legal and
other professional costs necessary to execute the Company's
reorganization; and other risks and uncertainties detailed from
time to time in the Company's filings with the Securities and
Exchange Commission, including the Company's Annual Report on Form
10-K, as amended, for the year ended December 31, 2014 and Quarterly Report on Form
10-Q for the quarter ended June 30,
2015. You are urged to consider these factors carefully in
evaluating the forward-looking statements herein and are cautioned
not to place undue reliance on such forward-looking statements,
which are qualified in their entirety by this cautionary statement.
The forward-looking statements speak only as of the date on which
they are made and the Company undertakes no obligation to publicly
update such forward-looking statements to reflect subsequent events
or circumstances.
Media Contact:
Weber Shandwick
Liz Cohen
(212) 445-8044
Arielle Patrick
(212) 445-8470
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SOURCE American Apparel, Inc.