Dov Charney hires investment firm for potential offer for American Apparel
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London - As things continue to look bleak for struggling fashion retailer American Apparel, founder and former CEO and Chairman Dov Charney announced plans for a potential offer to save the company he founded in 1989.
According to a statement Charney released on Friday, he is currently "exploring plans with investors and industry executives in an effort to develop a value-maximizing solution for the Company, its thousands of manufacturing, retail, administrative and creative employees, its customers, as well as the Los Angeles community where American Apparel is one of the largest private sector employers."
Dov Charney announces plans to regain control of American Apparel
He has teamed up with the Los Angeles-based investment firm Cardinal Advisors, who have agreed to act as financial advisor, "in connection with an evaluation of strategic alternatives" involving American Apparel. The firm confirmed to WWD that they are working together with Charney on a possible bid for American Apparel, as they believe that Charney is likely the best person to oversee the brand's operations and lead a turnaround plan following the retailer filing for chapter 11 two months ago.
The statement stresses that Charney "is confident that new and existing investors, working with him and his team of industry leaders," would be able to achieve "significant long-term value" for American Apparel stakeholders, which include thousands of employees, by breathing new life into the label's sales and profitability, but does not include any details on his plans.
Charney potential bid comes as the retailer completes a reorganization scheme which will see 200 million dollars worth of debt be exchanged for equity, a move which is set to wipe out shareholders including Charney, leave the company in the hands of Standard General hedge fund.
Dov Charney seeks out potential investors to back his scheme for American Apparel
However, any successful offer to restore the company would have to surpass 350 million US dollars in order to ensure the amount owed to bondholders is covered, as well as the 90 million US dollars in debtor-in-possession financing and the 40 million US dollars of exit financing included in American Apparel's chapter 11 plan, noted The Wall Street Journal, as the reorganization plan already has the support of 95 percent of the American Apparel's secured lenders.
A spokesperson for American Apparel confirmed that the company received a letter from Charney indicating his interest in making a potential bid for the company, but was unclear if he had secured the financial back for his plan. The spokesperson added that American Apparel evaluates all indications of interest in the company, but it is too early to comment on the matter.
The announcement comes not long after the disgraced founder was reportedly "too broke" to pay his legal fees, as his net worth is tied up in American Apparel stock, whilst certifying rumours that Charney had been working on an plan to regain control of American Apparel since he was ousted from his role as CEO last summer.
Photos: Save Dov Instagram and American Apparel Facebook