American Apparel Inc.’s board of directors rejected the latest takeover offer involving the company founder and fired chief executive officer Dov Charney.
LOS ANGELES, United States — American Apparel Inc.’s board of directors rejected the latest takeover offer involving the company founder and fired Chief Executive Officer Dov Charney, two people familiar with the decision said.
The vote means an offer valued at $300 million from three investment funds who’ve aligned with Charney must be further sweetened to win over the company, or they must convince a judge next week to throw out a competing proposal backed by American Apparel’s lenders. The company is open to a revised offer from the funds, one of the people said.
Hagan Capital Group and Silver Creek Capital Partners have offered to buy the company and bring back Charney, who was fired in 2014 when the board accused him of misusing corporate funds and violating the sexual-harassment policy.
Time is almost up for the funds and Charney. On Jan. 20, the company will be in court seeking approval of its reorganization plan, which would cut about $200 million of debt. The company would be taken over by a group of senior lenders, including Monarch Alternative Capital LP.
Almost all of the company’s creditors support the Monarch-backed plan, including a committee of unsecured creditors, who settled the last of their differences with American Apparel. That leaves Charney as the only major objector to American Apparel’s reorganization proposal.
The retailer was struggling with losses and debt under Charney, and its results only worsened after his dismissal. When it filed for bankruptcy protection, it had $199.3 million of assets and $397.5 million of debt.
Charney argues the Hagan proposal is better for creditors than the company’s current plan. The company’s investment bank said the retailer is worth as much as $270 million, assuming American Apparel hits sales targets in the next few years and can leave bankruptcy with no more than $135 million of debt.
The Hagan-led funds had made an offer valued at more than $200 million on Jan. 8 and sweetened it to the current bid three days later.
The case is In re American Apparel Inc., 15-bk-12055, U.S. Bankruptcy Court, District of Delaware.
By Steven Church, Matt Townsend; editors: Andrew Dunn, Joe Schneider, Stephen West.