A Delaware bankruptcy judge approved American Apparel’s bankruptcy plan Monday morning, capping two days of testimony in court last week and leaving the Los Angeles-based company on firmer footing to emerge from bankruptcy later this year.
The company’s plan, which had already received the support of its bondholders and creditors’ committee, will ultimately allow the company to exit Chapter 11 with less debt and about $2.5 million in distributions to unsecured creditors.
American Apparel founder Dov Charney had sought to block the plan’s confirmation, objecting to it along with a request from the company to extend a period of exclusivity for the plan that would block any alternative proposals for the company. Both objections were struck down.
Charney late last year had aligned himself with Hagan Capital Group and Silver Creek Capital Partners in a bid to buy the company with the most recent offer made earlier this month for $300 million. The offer, which would have placed Charney back in a leadership position at American Apparel, was ultimately rejected by the board on the basis that it would have left the company with more debt and would have also sent the company back to the drawing board in obtaining creditor support making it “not a meaningful proposal,” according to Judge Brendan Shannon. The company was running up against the clock with its debtor-in-possession financing, which required plan confirmation by Feb. 2 or it risked losing it.
Charney’s case largely centered around what his attorneys and he himself characterized in his own testimony last week as an unfair sale marketing process, a point of discussion not for the hearing.
“What is before the court is the debtor’s request to confirm a plan, not a sale hearing,” the judge said during today’s meeting. “Were this a sale hearing, I would not hesitate on this record to send the parties back to the auction table…”