American Apparel’s rumored second bankruptcy was cause for the litigation trustee in its bankruptcy case from last year to move up the payout of some $2.5 million to creditors of unsecured claims.
The bankruptcy court judge overseeing the company’s case on Wednesday approved moving up the deadline to review the trustee’s request, with a hearing now set for Nov. 8. The matter was originally scheduled to be heard no earlier than Nov. 21.
The disbursement is part of the company’s confirmation plan confirmed by a bankruptcy judge earlier this year, according to the trustee in court documents.
A second bankruptcy could impact the company’s ability to disburse those monies, causing the trustee to ask a judge Monday to be named disbursing agent and set an expedited hearing for Friday.
In addition to the $2.5 million, the trustee’s motion also included a request for an additional $250,000 for expenses related to the administering of the claims payments.
American Apparel pressed back against the request Tuesday requesting time to further discuss the matter with the trustee and also countered that the $2.5 million in payouts is not required under the plan.
American Apparel filed for bankruptcy in October and emerged from it earlier this year, but the business has remained challenged.
More recently, former ceo Paula Schneider exited the firm in October after less than two years on the job. She was tapped to turn around the business following the ouster of founder Dov Charney, but there’s been little clarity on the progress of that strategy. That same month, the company enlisted an auctioneer to sell off the equipment of its Hawthorne, Calif., dye house, which it had said earlier this year would be shuttered in an effort to consolidate operations.
Schneider’s departure came midway through the company’s process to shop buyers of all or part of the business, with Iconix Brand Group and Authentic Brands Group rumored suitors. Neither firm has confirmed interest publicly in the business. Sources say a second bankruptcy could be in the cards as part of a deal, which would address issues of debt as well as the company’s fleet of stores.