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Friday, December 2, 2022

Takeover Bid Sparks American Apparel Inc (OTCMKTS:APPCQ)

American Apparel Inc (OTCMKTS:APPCQ) is making a big move up on significant volume after the Company received a $300 million takeover bid from an investor group led by controversial founder Dov Charney.

Hagan Capital Group and Silver Creek Capital Partners are putting up $130 million with $90 million of new stock and $40 million from a term loan. The Company would exit bankruptcy with $160 million in cash and a $50 million credit line.

American Apparel Inc (OTCMKTS:APPCQ) is a vertically-integrated manufacturer, distributor, and retailer of branded fashion-basic apparel based in downtown Los Angeles, California. As of September 30, 2015, the Company had approximately 9,000 employees and operated 227 retail stores in 19 countries including the United States and Canada.

The bankruptcy filing came after five years of steady losses that topped $340 million with another $45 million lost this year. The final straw was a $13.9 million interest payment due on Oct. 15 that the Company was unable to pay.

The Company’s founder Dov Charney was fired as CEO for alleged misconduct, including misusing company funds and failing to stop a subordinate from creating blog posts that defamed former employees. He will be the biggest loser here as along with other shareholders, his stake in the company will be wiped out, according Neil Saunders, chief executive of research firm Conlumino.

According to many the bankruptcy filing makes American Apparel an attractive acquisition target. CEO Paula Schneider said the company was not looking to sell at any point soon. “My understanding is that bondholders are interested in owning the company.”

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Earlier this year new CEO Paula Schneide said “We are committed to turning this company around. Today’s announcements are necessary steps to help American Apparel adapt to headwinds in the retail industry, preserve jobs for the overwhelming majority of our 10,000 employees, and return the business to long-term profitability. Our primary focus is on improving the processes and product mix that have led to steep losses over the past five years. Our customers, employees, and local communities around the world believe that American Apparel is an iconic brand that deserves to succeed. My job is to make that a reality.”

According to the pr on the $300 million takeover bid ”Charney has developed a business plan that he and the Investor Group believe would rapidly improve the Company’s business performance. He has also held discussions with many highly regarded industry executives, with exceptional track records, interested in joining the Company if the Investor Group’s proposal were to be successful and Charney returns.

Mr. Charney stated, “American Apparel is one of the largest private sector employers in the city of Los Angeles, providing thousands of manufacturing jobs. This discussion is not just about the impact on the investor returns, but also about the livelihood of thousands of workers. I am confident that given the opportunity I will successfully turn around the Company’s fortunes, return it to profitability and to a market leading position again.”

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Currently trading at a $5.2 million market valuation APPCQ has been making a big move up after founder Dov Charney who owns 42% of the commons stock announced a $300 million takeover bid back by Hagan Capital Group and Silver Creek Capital Partners that would preserve the commons and clearly there is nobody more eager for APPCQ to emerge out of reorganization with the commons intact then Charney who owns 42% . We will be updating APPCQ as events unfold so make sure you are subscribed to Microcapdaily so you know what is going on with APPCQ.

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Disclosure: we hold no position in APPCQ either long or short and we have not been compensated for this article.

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  1. What does this mean for the stock and shares moving forward?
    Will the company void current stocks under APPCQ, or if the company emerges from its restructuring will current APPCQ shares be continued?


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