American Apparel ron burkle

American Apparel LLC received approval Monday to continue drawing down on its $30 million debtor-in-possession loan.

A judge had approved use of as much as $10 million on an interim basis last month, with Monday’s final order allowing the Los Angeles T-shirt firm additional breathing room to continue operations as it winds its way through bankruptcy and a possible sale next month.

Last week the unsecured creditors committee pushed back on terms of the DIP financing specifically as it relates to protections afforded to the secured lender group, along with a request for more time to look into the conduct of the lender group as it relates to the company’s first bankruptcy, which was filed in October of last year.

Those concerns raised by the committee will be heard at a hearing Jan. 12, the decision of which will not impact the Monday ruling on tapping the DIP from Encina Business Credit LLC.

American Apparel filed for Chapter 11 in November, nine months after emerging from its first go-round and with the hope of selling off all or parts of its business in a bankruptcy auction. Gildan Activewear Inc. — with an initial offer of $66 million — will serve as the stalking horse bidder in next month’s auction and has expressed interest in the company’s intellectual property and potentially some of the manufacturing facilities. But it will not be taking on American Apparel’s U.S. retail business.

This second bankruptcy drew the ire of the litigation trustee representing the group of unsecured creditors from the company’s first Chapter 11. The group asked a judge last week to toss out the second filing, calling it an “action done in bad faith” that would allow the company to skirt having to pay $2.5 million owed to the group. The company was ordered to pay that group of unsecured creditors — which originally had claims from the first bankruptcy totaling more than $100 million — the $2.5 million in two payments, neither of which was made prior to the second Chapter 11 filing.

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