American Apparel files for bankruptcy again amid £52m Gilden Activewear deal
American Apparel has filed for bankruptcy for the second time in just over a year and agreed to sell its brand to Canadian clothing manufacturer Gilden Activewear in a deal worth 66 million US dollars (£52.6 million).
The beleaguered US retailer voluntarily filed for Chapter 11 bankruptcy protection on Monday, according to Gilden Activewear, which expects to finalise its acquisition during the first few months of 2017 once the bankruptcy process is completed.
Gilden said it will acquire "certain assets" as well as intellectual property rights to the American Apparel brand and will buy additional inventory from the US company while it integrates the business .
The Canadian firm will not be purchasing any of American Apparel's existing retail stores.
It marks American Apparel's second bankruptcy filing, having first sought court protection in October 2015 after flagging up problems with its finances months earlier.
In August 2015, the company s aid it might not have enough cash to keep the firm going as losses widened.
The business later reached a restructuring deal with 95% of its secured lenders to reduce its debts.
Last week, it was announced that American Apparel's UK business would be put into administration amid tough trading conditions across Britain and America.
Administrator KPMG said that while the brand and US business were being sold, the UK and European operations were not part of the sale and were likely to be wound down.
The cult fashion brand makes all of its garments in the US, and trades on its "Made in Downtown LA" reputation.
The business was founded in 1989 by Canadian Dov Charney, who dropped out of college and borrowed 10,000 US dollars (£6,600) from his father to start the firm. The business first traded as a public company in 2007.
However, the group later fired Mr Charney over a series of misconduct claims made against him.
American Apparel's chief executive, Paula Schneider, stepped down in September this year.