Statement By Dov Charney Regarding American Apparel Bankruptcy Ruling


LOS ANGELES, Jan. 25, 2016 /PRNewswire/ 

I am obviously disappointed by the judge’s decision to confirm the debtors’ reorganization plan and hand ownership of American Apparel to its bondholders.

This outcome is one that I have been working tirelessly for nearly two years to avoid in an effort to protect value for the company’s various stakeholders. Now all stockholders will have their shares and value extinguished.

Many of the company’s loyal vendors will recover only cents on the dollar of what the company owes them. And the company’s workers, faced with current management’s inability to generate profits, face a highly uncertain future.

It is without question that the debtors, Standard General and the bondholders carefully orchestrated a strategy to pass the Company over to the bondholders without exposing it to fair market test or bidding.

american apparel

This outcome was the only logical and unfortunate conclusion of many months of pre-bankruptcy preparation on the part of the bondholders and the company’s board.

Here the bondholders and current management effectively used Chapter 11 as a defensive measure to thwart my efforts.

This goal was pursued despite the many alternative pathways and opportunities to preserve value.

As evidence of the lengths the Board went to in facilitating its scheme they filed a “lock – up” agreement, prohibiting secured creditors and bondholders from considering alternative offers.

american apparel

Chief Judge Shannon was clearly concerned about the Company’s failure to undertake any marketing effort and on November 19 he ordered them to market the Company. Although the Debtors were uncooperative even after the Court’s order, through intensive efforts with our financial partners, we submitted-a bid that was demonstrably superior to the Debtors’ filed plan. Indeed, the Court said in its ruling that if American Apparel were for sale, the Court would not have hesitated to send the parties back to the auction table.

The Debtors then increased the economics to match the offer, but refused to engage in further negotiations. They then embarked on a scorched earth campaign to block further bids, subjecting myself and my financial partners to days of depositions during the waning days of the already truncated marketing process. In short, they did everything possible to curtail all efforts to bring fair, reasonable value to creditors.

american apparel

Since relocating American Apparel to Los Angeles in the late 1990’s from South Carolina I was bucking conventional wisdom by trying to preserve American manufacturing jobs and keep apparel manufacturing in the United States. Even though everyone else was moving jobs offshore, I was able to build and grow a profitable apparel business by manufacturing domestically. At every step along the way people challenged me and said I was crazy for trying. American Apparel was one of the only companies that shattered the sweatshop paradigm by paying fair wages, and did so at scale. By the time American Apparel went public in 2007, it was running the largest operating apparel manufacturing plant in the United States.

For these endeavors I remain justifiably proud.

There was logic to the company’s unconventional business strategy as evidenced by the company’s historic earnings.

sass american apparel

Until I was removed as CEO, the company had posted positive EBITDA (earnings before interest, taxes, depreciation and amortization) in nine of the last ten years.

There were many other things that we did differently at American Apparel, besides manufacturing domestically, in which we were ahead of the times.

Whether it was deploying RFID technology in our retail stores, fulfilling e-commerce orders direct from retail stores, or opening stores in emerging neighborhoods before they were recognized as attractive retail markets (just a few examples among many), we were often ahead of the curve.

It was because our organization respected and celebrated creativity and unorthodox thinking that we were so successful, and I was committed to protecting this spirit of contrarian thinking.

american apparel

When the Company’s board removed me as CEO in June 2014, I was midway through what was shaping up to be a successful recalibration of American Apparel’s business. The process of my disenfranchisement ultimately resulted in a wealth transfer from the Company’s shareholders, vendors, and employees to hedge funds, lawyers, and bankers.

The company was rebounding from a catastrophic distribution center shift implemented by the former CFO and was on track to post a positive operating profit in the second quarter of 2014, and on track to hit its earnings guidance for the year of $40 million EBITDA.

With the company’s bonds trading down because of the uncertainty around the success of the turnaround, I believe I was pushed out as CEO because of pressure that the bondholders exerted on the company’s then CFO and board of directors (As I have alleged in my litigation, I maintain the view that the then CFO, John Luttrell, conspired to sell the company behind my back and to that end disenfranchised me as a shareholder during the June 2014 annual meeting by way of a misleading and fraudulent proxy).

american apparel

The resolute goal of the bondholders was to sell the company so they could profit, but I had to be pushed out of the way since I was the company’s largest shareholder.

I was not willing to give up, and I attempted to regain control of the company because of my concerns that the company was still in a very vulnerable position with its turnaround not yet complete.

I feared, with good reason, that the new management, not understanding what made American Apparel successful in the first place, would try to run the company in a more “conventional” manner.

Because the board and new management did not appreciate that a vertically integrated domestic manufacturer had to approach business in a fundamentally different fashion, I felt that the company’s future was in serious jeopardy if they ran it like a traditional retailer. For this reason, I entered into a partnership with the hedge fund, Standard General, to regain control of the company. I could have assembled a coalition of shareholders to force a change at the board level, but given the urgency of the situation, I decided to surrender part of my economic interest in the company to regain control quickly.

american apparel

When Standard General did not deliver on their promises to reinstall me as CEO by late summer 2014, even though they had appointed new directors constituting a majority of the board, Standard General said I could buy them out of their investment. When I showed up with investors to do precisely this, they said that they could only support a go-private transaction for the entire company.

In December 2014, a private equity firm offered $1.30-$1.40 per share to take the company private. The board rebuffed this offer as well, as offering inadequate value to shareholders for a company they said was worth much more. Instead, the board pursued a path where only a year later the shareholders are receiving zero. The offer that I made in conjunction with Hagan Capital to purchase the company was just one in a long list of offers, and there was no reason to believe that this one would end any differently, given the powerful forces steering the company towards a reorganization where the bondholders end up owning the company. While many parties close to me feared that this would be the outcome of my partnership with Standard General, even they could not fathom such a reversal.

american apparel

While outside observers might not yet appreciate it, I believe the path being followed by the company’s management is a road to ruin. The financial results of plummeting sales and EBITDA thus far support this. Management attempts to explain away their abysmal financial performance, as the result of inadequate liquidity, but the truth is that they misunderstand the unique business model that American Apparel must pursue as a vertically integrated domestic manufacturer.

Their losses are self-inflicted, the result of poor decisions, made by executives who are learning as they go. Part of me can scarcely believe that a court could confirm their plan as feasible given the operating performance of the business under their management and 18 months into their turnaround plan.

But while the bondholders are likely to be put in a position to throw good money after bad for consciously pursuing this path, I worry for the manufacturing workers and the business community who are the collateral damage to this corporate drama.

american apparel

I’m proud of the creativity and innovation that American Apparel fostered over the years. We made important strides in the areas of ethical manufacturing and art as they intersect with commerce.

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.

At the end of this saga, I, like the many former stockholders, will most likely be left with nothing. Despite that, what gives me great optimism are the things I possess that can’t be stolen by a predatory hedge fund – my ideas, values, drive, authenticity, integrity and my passion. To that end I ask that my supporters stay tuned.

Dov Charney
(213) 923-7943


today’s sam’s birthday, shes 29

sam on a boat

once todays birthday girl, samantha, and i were on a row boat in canada and we were having a farting contest

im extremely competitive when called out so my farts were coming out in rapid succession

at one point they were powering our craft

and killing wildlife in our wake.

sam admitted defeat and retreated to the bow and i took this picture.

she used to work at american apparel as a model. dov loved her. why wouldnt he.

now theyre bankrupt because they took the company away from him last year because of blah blah blah.

but sam, now a bankruptcy attorney, says depending on the deal that the judge cuts with those who AA owes

and the geniuses who yanked control away from Dov,

when the company gets out from under all of the millions of dollars of debt and

breaks the leases with the underperforming stores,

american apparel might be in better shape than ever

which would be a perfect time to reunite the prodigal son with his creation.

which is why libras are the best. so optimistic.

american apparel is going bankrupt tomorrow

michael being michael

this is what happens when you take a mans dream and vision and think you can fix it.

sometimes theres nothing to fix.

sometimes you just need to chill a lil.

the first couple of springsteen albums didnt sell very much.

they were gonna drop him right before born to run came out.

today they woulda dropped him way before born to run.

bruce woulda gotten greetings from asbury park today and if it didnt do gangbusters

he’d be gone.

maybe hed self produce the wild and the innocent but theres no way he woulda had a chance to do born to run on columbia’s dime.

the bankruptcy judge should say dov you’re crazy, but you Are american apparel

and we need a factory like yours in downtown LA

and then just lets them refinance but only if dov gets his company back

the end!

sometimes i think im the greatest stock trader in the universe

michael jackson with a fourtyi’ll do something daring like buy american apparel when theyre as low as sixty nine cents

and i’ll say to myself, they own the factory, they own the stores, theres no middle man, how on earth could this not be a winner.

and then the visionary founder will find himself in hot water with the board that he hand picked and they’ll do something loco like boot him out.

and then he’ll get investors to give him tons of cash to buy more of the company

and then another group of investors will pump money into it

and then all of a sudden the stock is double

and then i’ll sell cuz mama mia any time your investment doubles: sell and buy something else with lots of potential.

and i’ll look back at what i just did and i’ll think im the greatest stock trader in the universe.

and then i’ll consider buying IBM because theyre gonna partner with apple on some apps

and i’ll think im the dumbest stock trader in the universe.

and then i’ll find a photo of michael jackson drinking a bottle of vodka and i’ll say to myself post this on the world famous blahblog so you’ll never forget

that sometimes the most talented people can be so weird

and unless you can moonwalk, youre better off not being so weird.

best LA Times Shareline ever

dov charney LA Times

one of the smartest things about the new LA Times redesign is Sharelines.

most websites have one suggested twitter headline that’s usually a dull version of the original web hed

but one of the new duties (I imagine) for LAT web producers is to think of three alternative headlines that would work best on Twitter to encourage retweets and clickthrus.

these three on today’s story about recently booted always entertaining American Apparel CEO Dov Charney show how different suggested tweets would fit three different types of readers.

that last one tho: instant classic.

maybe im a weirdo, but i like weirdos

dov charney

i like leaders who know what theyre doing, who have a vision, who work every day, who make things in america.

is he creepy and a human resource (and legal) department nightmare? of course!

but he’s being himself. isnt that what we teach kids to be? isnt that what americas supposed to be?

dont we tell ppl, come from your heart, figure out your passion and run with it?

but theres two other very important things about being an american businessman:

dont break the law and dont lose any money.

american apparel seems to saying that because the company is losing money

that now they will show him the door because of legal issues.

its that whole complicated dance we have with Alphas

we love how crazy and demanding and insane they are

i find it hard to believe that whoever replaces dov will continue to manufacture clothes in LA

nor will continue to provide edgy fashions that push the envelope

nor will they aggressively push for immigrant rights or even gay rights.

and Lord knows they won’t have their phone number out there on the internet for all to see

and omg call.

and listen as he omg answers.

we had an intern at the LA Times who was more of an exchange journalist.

he worked for a German newspaper and he was allowed to chill at the LAT to learn what we were up to.

one day he asked me who the most interesting businessperson was in LA and i said Dov.

he then asked me if i knew how to get to Dov’s PR people. i said f that, just call him.

he said, great can i have his number. i said Google it.

because Dov has no problem with the foreign press, bro got his interview in a few days

and boom it was in that German paper a few days after that.

something tells me that the next CEO won’t be anything like that.


xbi said we need you to go to american apparel hq


i was all, no can do im on vacation.

they said how can you be on vacation if you’re not working for them and not working for us?

i said, i believe you just defined vacation to the t.

they were all, then this is perfect because you dont have to do anything. just take her out to dinner, maybe a drink afterwards.

let me tell you something about “dont have to do anything”, i told the xbi. im on a personal investigation as to the limits and mystical side effects and benefits of doing Nothing, and arranging a time with a stranger, and a place, and things to do or not do, all go against the basic principles of Nothing. once again you seem to have issues with the definitions of words.

then they said something about no strings attached which made me hang up the phone because with them theres always strings attached in some way.


because Nothingness leads to Everythingness her name was Ana she was from Montreal and we ate poutine in Westwood that night. she was the first to spot the canadian and quebecois flags.


because i’m a dorky ugly american i had a Canadian, and because she’s classy she had white wine


the poutine, it was amazing. we had shaved duck, creamy beef, and traditional. the curds were imported from Wisconsin because for some reason Californian dairies don’t produce cheese curds. Say what?


the owner of the place, Soleil, is from Montreal and made half of his bistro dedicated to poutine. we of course mistakenly sat on the fancy wrong side and when we didn’t see one mention of poutine on the menu he politely walked us over to the correct side and we were amazed by the poutine menu and the fact that you could order a threesome of poutines ($19) of any flavor they had. my fave was the shaved duck.


afterwards we drove down sunset blvd and she said lets complete the french theme and have a drink at the chateau marmount. i said id never been there. she said but youve lived here longer than ive been alive. i said i know! she said why? i said i dont know, maybe cuz parking is so bad.


so we drank Chimay (moi) wine (la) and now i have two new favorite haunts.

if i ever wrote a picture book

american apparel ad

which is something id rather write instead of like a novel

or a tour book

or a blogger tell all

or a secret history of the xbi

or an autobiography of isla vista

i would make a book of

“things i always look at when i drive around LA”.

it would start with the american apparel billboard next to the burrito king

at the intersection of Alvarado and Sunset in echo park.

i think they own it cuz Dov lives nearby.

i love it because it always changes and sometimes its mildly outrageous.

if i was AA i would have a live cam on it

or a new picture every times it changes.

and have it linked off their website somewhere.

i dont know who this alexi wasser person is

but I think American Apparel should hire her immediately.

they’re a freakin penny stock (arent we al these days) who has great display ads

and even better online ads, but for some reason the kids arent flocking to their stores as they did in olden times

then all of a sudden theres this alexi character who pretty much embodies that brand’s whole essense

and it appears that she makes her own video spots pretty well by herself (cough:low-overhead)

and suddenly you have an online viral sausage machine of hits.

except unlike the LonelyGirl15 malarkey, this is somewhat genuine.

as genuine as youre gonna get for 2011 at least.

a big sister who wears the clothes and speaks to a good chunk of the demo.

getter done dov