American Apparel LLC will proceed with its auction after a bankruptcy court judge Friday morning approved the schedule for bidding as some brace themselves for twists in the plot line of the company’s sale.
While a potential deal has been worked out with Canadian T-shirt and basics firm Gildan Activewear Inc., other parties have expressed interest in the business. That includes the retail portion, which is not included in a Gildan transaction.
It appears now a creative solution that would save the most jobs and more of the company could appear through combination of approved bids rather than via a single offer for American Apparel.
“We do think that marrying the parties is going to be the key here,” said Cathy Herschcopf, one of the attorneys representing the committee of unsecured creditors during Friday’s hearing.
The pool includes a mix of parties, some of whom, by design, have not met or do not know each other, she said. There could still be hope for a more substantial sell-off of the company’s assets, which the company had seen before in a previous deal in which “they were left at the altar…when they thought they had a bid for a larger group of assets,” Herschcopf said.
The Los Angeles company filed for bankruptcy last month, also striking a possible deal to sell its intellectual property and other assets to Gildan, making it the stalking horse bidder in the bankruptcy auction. The initial bid is $66 million plus the cost of inventory Gildan will buy that lets American Apparel continue operating from now until the closing of a sale. Gildan also has the choice of taking over American Apparel’s manufacturing facilities in Garden Grove, La Mirada, South Gate and Los Angeles. That’s a decision that would have to be made no later than five days before the company’s auction next month and upon which some 3,457 jobs hang in the balance.
An attorney for New York hedge fund and American Apparel bondholder Standard General urged for an expeditious auction process, pointing out the loss of $1 million to $2 million with every week American Apparel remains operating while also expressing doubt about additional bidders stepping forward, pointing out how long the business had been up for sale prior to its second bankruptcy filing.