American Apparel"s 12 MOST Controversial Ads!
Law360, Wilmington (January 12, 2017, 6:13 PM EST) -- Bankrupt clothing maker and retailer American Apparel received court approval Thursday in Delaware for a $103 million sale of its worldwide intellectual property rights and its wholesale inventory to a stalking horse bidder.During a hearing in Wilmington, American Apparel attorney Carl Black of Jones Day LLP said that Gildan Activewear emerged from an auction as the top bidder, having upped their offer by more than $20 million at the Jan. 9 auction. The company also sold two leases for its manufacturing facilities back to landlords for $440,000.
Im pleased to report we had a successful sales process, Black said. We had bidders come forward and we managed to get a pretty substantial increase over the stalking horse price.
Other offers came in for the companys remaining assets as well as bids from liquidators hoping to run going-out-of-business sales at American Apparels retail outlets, but they did not come to pass. Black said the liquidating bids were lower than what the company felt it could achieve by running its own store closing sales. Bids for the companys equipment faded after Gildans successful bid included some of the machinery located at its manufacturing facilities.
The stalking horse bid approved by the court earlier in the case was for $66 million with an agreement in principle that Gildan would also buy american apparels wholesale inventory and commit to purchase orders for other inventory. At the end of the auction, Gildan had offered $86 million for the IP rights and wholesale inventory and pledged to make $16 million in purchase orders for additional inventory.
Black said that now that the sale has been approved, the company will be moving quickly to file a Chapter 11 plan and get it approved by the court. To that end, U.S. Bankruptcy Judge Brendan L. Shannon gave his approval to a settlement of issues lingering from the companys previous Chapter 11 case that threatened to derail its current restructuring effort.
Erin Brady of Jones Day presented the settlement between the company, its unsecured creditors, the committee off lead lenders financing the current case and the litigation trustee appointed under its previous case. Under the terms of the settlement, the company will segregate $2.5 million in three escrows for the benefit of its creditors and the litigation trustee. In exchange, the creditors committee will release any challenge claims it could have brought against the lenders committee and the litigation trustee will drop his motion to dismiss the current case.
Brady said the resolution to those issues will help the case move forward on a much more rapid basis as the sides had been gearing up to go to war when the bankruptcy petitions were filed.
We came to a settlement really early in the case that creates a framework for resolving these cases in an orderly fashion, Brady said.
The resolution will also see any opposition to the companys use of cash collateral dropped so that American Apparel can continue funding its operations through the pendency of the case.
American Apparel had filed for court protection barely a year after the court confirmed a Chapter 11 plan from its previous bankruptcy case, saying its turnaround efforts were unsuccessful.
This time, the company listed about $215 million in debt, much of it resulting from its previous DIP financing package and related exit facilities.
American Apparel is represented by Scott J. Greenberg, Erin N. Brady and Michael J. Cohen of Jones Day, and Laura Davis Jones, James E. O"Neill and Joseph M. Mulvihill of Pachulski Stang Ziehl & Jones LLP.
The committee is represented by Justin R. Alberto, Evan T. Miller and Gregory J. Flasser of Bayard PA, and Cathy Hershcopf, Seth Van Aalten and Michael Klein of Cooley LLP.
The litigation trustee is represented by Richard M. Beck and Domenic E. Pacitti of Klehr Harrison Harvey Branzburg LLP, and David Posner and Gianfranco Finizio of Kilpatrick Townsend & Stockton LLP.
The case is In re: American Apparel LLC, et al., case number 1:16-bk-12551, in the U.S. Bankruptcy Court for the District of Delaware.
Editing by Joe Phalon.
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