American Apparel Filed for Bankruptcy

According to The New York Times, early this morning American Apparel filed for Chapter 11 bankruptcy protection.

The brand, once the coolest clothier on the block, has been plagued with drops in sales, massive amounts of debt, and a prolonged legal battle with its controversial founder, Dov Charney.

Before filing its bankruptcy petition, the clothier struck a deal with most of its secured lenders to reduce its debt via a debt-for-equity conversion, a process by which bondholders trade in their debt for share in the company.

The deal will allow the company's 130 U.S. stores to remain open, as well as its Los Angeles manufacturing operations. It's overseas stores won't be affected and the restructuring is expected to take six months.

As there have been no layoffs announced, this may be a chance for the company's new CEO, Paula Schneider, to implement her plan to turn around the struggling retailer.

As for Charney, he's out quite a lot of money as well. The current deal with the company's lenders has reduced the value of his shares from $8.2 million to next to nothing.

Though the brand will have to undergo many changes to keep itself afloat post-restructuring, one thing the company won't do is move its manufacturing out of the U.S. Despite rumors it'll move production to Mexico or El Salvador, Schneider says that won't happen.

"We will continue to manufacture in America," she says. "That's what the brand is. That's what it's about."