Dov Charney Gathers $300 Million for American Apparel Coup Attempt
American Apparel is his baby, and Dov Charney won't let it go.
The hipster clothing company he founded as a T-shirt line in 1997 was stripped from Charney in December 2014 — he was fired by his own board following allegations of on-the-job sexual impropriety — and he's been fighting to take the Los Angeles–based firm back ever since.
In fact, this is his second try at a coup.
This time around, Charney has paired up with Hagan Capital Group and Silver Creek Capital Partners to submit a $300 million takeover offer to American Apparel's board.
The company, sans Charney, filed for bankruptcy in October. It cited an interesting figure — $300 million in losses over a five-year stretch — in its filing.
The bankruptcy was part of an American Apparel "turnaround plan" that includes closing underperforming stores. There also have been employee layoffs.
Under Charney's reign, the firm expanded ambitiously, to 246 retail locations in 20 countries, while paying Los Angeles–based garment workers better-than-minimum wage.
Charney has said the company's alleged strategy of cutting its way to solvency is not the way forward.
"The company is not managing a turnaround," he told us in spring. "It is managing a severe decline in sales."
The proposed new investors want to continue Charney's previous expansion plans, according to his camp.
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His people say they feel that the current board's cuts have endangered the brand's viability. They cited, for example, the recent closing of American Apparel's first store, in Echo Park, as a symbolic blow to the clothier.
"This discussion is not just about the impact on the investor returns but also about the livelihood of thousands of workers," Charney said in a statement yesterday. "I am confident that given the opportunity I will successfully turn around the company's fortunes, return it to profitability and to a market-leading position again."
Charney is trying to block the company's bankruptcy in court. The Weekly reached out to him for comment but was told he couldn't speak because of the ongoing case.
The takeover offer includes $130 million from Hagan Capital Group and Silver Creek Capital Partners, comprising in-hand cash and a $40 million loan, $160 million of American Apparel's own "liquidity and new equity," including $50 million in unused loan money, and millions more cash that's part of an "equity cushion," according to the would-be buyers' statement.
American Apparel has a bankruptcy hearing Jan. 20, which could make it difficult to digest such a takeover beforehand.
The firm said this in a statement:
American Apparel evaluates all bids consistently, and in the ordinary course. The company remains focused on pursuing the completion of its financial restructuring following its planned bankruptcy court hearing at the end of this month.
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