American Apparel Fights Supplier in Latest Bankruptcy-Related Struggle

image: American Apparel

American Apparel LLC, which earlier this month filed its second bankruptcy in just over a year, on Wednesday said its Black Friday and Cyber Monday sales are at risk from a payment dispute with a supplier of scanning equipment.

The company, iTek Services Inc, is demanding $6,000 before it turns over shipment of scanning equipment that American Apparel said in court papers it needs for its distribution center in La Mirada, California. In papers filed in U.S. Bankruptcy Court in Delaware, the retailer asked a judge to compel iTek to deliver the scanning gear and to drop its demand for payment.

American Apparel said that without the gear, which is linked to inventory and logistics systems, it will not be able to get goods to its stores or to online customers in a timely fashion during the most important shopping days of the year. The retailer said more than a quarter of its staff who process orders could be idled, inviting “irreparable losses.” “Grave” consequences for American Apparel’s estate will follow, the retailer said.

American Apparel filed for bankruptcy last week after struggling to overcome mounting losses and intense competition. The iconic teen retailer, one of the largest clothing manufacturers in the United States, had filed its first bankruptcy last year due to a $300 million debt load, excess inventory and millions in legal liabilities stemming from former chief executive Dov Charney, who was ousted in 2014 over allegations of misconduct.

American Apparel emerged in February owned by former bondholders, led by hedge fund Monarch Alternative Capital LP, after defeating Charney’s effort to buy the company back.

An aggressive turnaround plan failed, underscored by a nearly 33 percent decline in sales, according to court papers the retailer filed last week. American Apparel now plans to sell its brand and wholesale inventory to Canadian clothing manufacturer Gildan Activewear Inc.

American Apparel wants to hold a court-supervised auction on Dec. 21, with Gildan setting a floor on bidding with an offer of about $66 million.

* The case is In re American Apparel LLC, in U.S. Bankruptcy Court for the District of Delaware, No. 16-12551.


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