WASHINGTON _ American Apparel Inc. has filed for bankruptcy protection for the second time in a little more than a year and has reached an agreement to sell the intellectual property rights of its brand and some other assets to Canadian apparel-maker Gildan Activewear Inc. for $66 million.
Gildan, of Montreal, has said it wants to keep jobs in the United States, specifically in Los Angeles, where American Apparel has manufacturing facilities, American Apparel spokeswoman Arielle Patrick said.
The Los Angeles manufacturer and retailer used edgy ads to rise to prominence under founder Dov Charney. But the once high-flying company struggled after the 2008-09 Wall Street market crash, and Charney was ousted as chief executive in 2014 after an investigation into alleged inappropriate behavior with employees and misuse of company funds.
Troubles continued after American Apparel emerged from bankruptcy last winter. And some recent turmoil, including another leadership change, led to rumors of a sale.
In a letter to employees Monday, the company's chairman, Bradley Scher, said the bankruptcy and deal with Gildan were necessary to keep the brand alive.
"We are confident that this decision is the best strategic move forward, in order to preserve the legacy of the American Apparel brand," he wrote.
American Apparel filed for Chapter 11 protection at U.S. Bankruptcy Court in Delaware on Monday less than 10 months after a judge there approved a reorganization plan that took the company private. That plan, approved in January, wiped out much of the company's debt and put the company under the ownership of its creditors.
Charney, whose ownership stake was wiped out in the earlier bankruptcy, tried to derail the restructuring plan and regain control of the company.
His effort was not successful, but the new privately held company continued to struggle. It laid off hundreds of employees in the spring.
And in September, Paula Schneider, the CEO brought in to turn the company around, announced she was leaving. She was replaced by general counsel Chelsea Grayson amid rumors American Apparel was looking for a buyer.
Gildan announced Monday that it had acquired the worldwide intellectual property rights related to the American Apparel brand and "certain assets" in a cash purchase.
The company said that American Apparel is "a highly recognized brand among consumers" and that it would separately buy American Apparel inventory "to ensure a seamless supply of goods" as the brand is integrated into its offerings.
Gildan said it would not buy any of American Apparel's retail outlets.
The deal is subject to approval by the bankruptcy court and is expected to close in the first three months of next year, Gildan said.
