American Apparel founder and ex-CEO Dov Charney just lost his best chance to regain control of the flailing clothing company.
On Monday, a Delaware bankruptcy court approved a reorganization plan backed by the company's bondholders and new management, passing over a competing plan presented by Charney and investors Hagan Capital Group and Silver Creek Capital earlier this month.
Charney has been fighting to get back into American Apparel since he was served with a surprise termination letter in June 2014, and his alliance with Hagan Capital and Silver Creek represented his best change — and perhaps his last. A major part of Hagan Capital and Silver Creek Capital's bid, valued at about $300 million, was to reinstall Charney, the firing of whom they called a "shortsighted mistake."
The public battle between Charney and American Apparel's new management played out again in bankruptcy court last week, with Charney claiming the company was stolen from him, and that his plan was the only way to save it. Lawyers for American Apparel, meanwhile, said the new proposal was "inferior" and opposed by bondholders.
The New York Times reported that Charney was interrupted several times by the court's judge while testifying last week, who asked him to stop "free associating." The news outlet quoted him as saying: "I’m a merchant, I’m a creative artist, I’m a photographer, I’m a marketer, I’m an industrialist...I don’t want to hand over my company. This is coercion."
The bankruptcy court judge said today that the new proposal didn't offer enough reason to reject the bid from bondholders, according to the Times.
American Apparel praised the court's decision in a statement today, saying it's "focused on exiting Chapter 11 and fully implementing its strategy." The retailer believes it can successfully turn itself around under its new management team.
Charney emailed a 1,500-word statement to reporters on Monday afternoon, which can be viewed in full here.
"The sad reality is that American Apparel, the largest garment manufacturer in the United States, will not survive at this pace and I don’t believe the current management has the talent to bring it back to health," he wrote.
Updates with statement from Charney.