American Apparel founder Dov Charney loses bid to win back control of retailer after approval of bankruptcy plan

American Apparel Inc. founder Dov Charney requires a new plan.  

U.S. Bankruptcy Judge Brendan Shannon in Wilmington, Delaware, Monday approved a reorganization that hands control of the clothing retailer to senior lenders, rejecting Charney’s alternative proposal and eliminating what may have been his last shot at retaking control of the clothing chain he soon started as a college student.

Senior lenders including Monarch Alternative Capital LP will trade their debt for charge of the retailer, reducing its liabilities by about US$200 million. Charney, who had been trashed in 2014, had assembled a group of investors to back his US$320-million takeover plan. He claimed a “faithless” board and investors conspired to shut him out.

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Los Angeles-based American Apparel filed for creditor protection in October. The company, known for its made-in-U.S.A. branding and racy advertising, posted losses each year since 2010. Its trouble was compounded by allegations of misconduct from the founder, which he denies.

Since his ouster in 2014, Charney has been looking for ways back in. He teamed with Hagan Capital Group and Silver Creek Capital Partners to put together the alternative takeover offer Shannon rejected Monday. 

“There really is not really a meaningful alternative on the table,” Shannon said.

The bankruptcy is within re American Apparel Inc., 15-12055, U.S. Bankruptcy Court, District of Delaware (Wilmington).

? Thomson Reuters 2016