Bad morning? Well, consider that you didn’t lose $8.2 million dollars after the once renowned clothing company you founded finally filed for Chapter 11 bankruptcy.
You, of course, are not Dov Charney, whose American Apparel officially declared bankruptcy in a Delaware court early this morning, the New York Times reports. The filing intends to transfer control of the company to its creditors, essentially a small conglomerate of hedge funds and investment firms that specialize in restoring the market value of companies on the verge of collapse. Those five firms—Goldman Sachs among them—are converting the debt owed to them by American Apparel into shares of the company. Here are the numbers:
Under the financing agreement, five American Apparel bondholders would convert some $200 million in bonds into equity in the reorganized company. Participating bondholders would also provide $90 million in debtor-in-possession financing, as well as $70 million in new liquidity.
The fresh financing would reduce American Apparel’s debt to $120 million from $311 million, and its annual interest expenses would fall by $24 million, the company said. The participating bondholders are Standard General, Monarch Alternative Capital, Coliseum Capital, Goldman Sachs Asset Management and Pentwater Capital Management, all hedge funds or investment firms specializing in distressed debt. Together, they represent 95 percent of the retailer’s secured lenders.
Asking the court for bankruptcy protection will also allow American Apparel to postpone various litigation against it, and the new liquidity will, the company says, mean it does not have to close its manufacturing hub in Los Angeles or any of its retail stores, and will also not have to lay off any employees.
The result of this takeover means that Charney, according to the Times, no longer has any stake in the company he founded in 1989. His shares in American Apparel—whose value is so degraded that it’s on the verge of being kicked off the New York Stock Exchange—were worth $8.2 million as of this Friday, but have now been reduced to nothing.
Late last year, Charney, whose reputation the current board says makes it difficult to deal with lenders, said he was down to his last $100,000 and was crashing at a friend’s apartment in New York. The exact nature of his net worth is up for debate—Curbed noted that he was in good standing with his $4 million L.A. mansion—but, well, things have certainly been better for the guy who used to get to call his female employees “perfect cum targets.”
[image via Getty]