Gildan Activewear Inc. now owns the American Apparel name, but had to boost its initial offer of $66 million by $22 million to win the bidding.
The Canadian firm, which makes T-shirts, fleece, socks and underwear, is expected to keep some of the retailer’s manufacturing, distribution and warehouse operations that are located in the Los Angeles area. A bankruptcy court judge in Delaware still has to approve the sale, which could happen on Thursday. Bids were due on Friday, and the auction was held on Monday.
Gildan is not taking over any of American Apparel’s retail sites, nor its retail business. Who gets to take over the store sites remains unclear. Shortly before the auction there were reports that Amazon.com and Forever 21 were interested in the stores, although neither company appeared to have put in a bid.
American Apparel surprised many in the industry when it filed its second Chapter 11 petition in November, the so-called Chapter 22 filing, within months of exiting its first tour in bankruptcy court. The company had been hampered by the debt accumulated when the turnaround plan efforts from its first bankruptcy filing – the filing was in October 2015 and the company emerged in February – failed to take hold.
American Apparel was founded in 1989 by Dov Charney, and became one of the largest vertically integrated apparel manufacturers in North America. But the last time it made a profit was around 2009 and when it exited its first tour of bankruptcy, creditors had agreed to convert $200 million of debt into equity, as well as inject $70 million of new capital into the reorganized firm. By the time it entered its second tour of bankruptcy court, the company was privately owned by creditors and bondholders and had severed ties with Charney.
Gildan, headquartered in Montreal, acquired Anaheim-based Alstyle Apparel LLC, a T-shirt and fleece manufacturer, in May for $110 million to expand its reach in the printables market.