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American Apparel Scrambles To Avoid Bankruptcy

Olga Khazan |
April 19, 2011 | 9:10 p.m. PDT

Senior Editor

From flickr user anitasarkeesian
From flickr user anitasarkeesian

Los Angeles-based American Apparel is frantically attempting to secure $10 million in rescue financing to avoid bankruptcy, sources have told the Wall Street Journal.

 "The money would come in the form of equity, this person said. The potential investor, whose identity couldn't be determined, isn't a well-known name, this person said. The company hopes to secure a deal as soon as this week."

The funds would help the clothing retailer avoid Chapter 11 bankruptcy in the immediate term, but it wouldn't remedy all of the company's financial woes. Over the past year, sales have fallen 5 percent, and the company lost more than $86 million.

The company has also been mired in bad publicity after five former employees filed sexual harassment lawsuits last month against CEO Dov Charney. Some alleged that Charney forced them to have sex against their will, and another claimed Charney photographed her nude. In 2009, the company lost 30 percent of its workforce in an immigration sweep, rendering the organization far less productive in 2010.



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