American Apparel emerged from bankruptcy Friday, canceling shares of its publicly traded stock and becoming a private company.
The Los Angeles clothing retailer and manufacturer is now owned by its former creditors under the name American Apparel LLC. The holdings of former American Apparel Inc. shareholders, including those of founder and former Chief Executive Dov Charney, were made worthless.
The company exchanged about $230 million in outstanding debt into new, private shares under a reorganization plan approved by a federal bankruptcy judge in Delaware last week.
American Apparel filed for bankruptcy protection in October after years of losses and a protracted battle with Charney, who was ousted in 2014 amid allegations of inappropriate behavior and misuse of company funds.
He fought to regain control of the company, but failed in his last-ditch effort — a $300-million takeover bid aimed at derailing the reorganization plan that was completed Friday.
The plan wipes out much, though not all, of American Apparel's debt, cutting the company's annual interest payments by an estimated $20 million. It also gives the company $40 million in new capital from investors and access to a $40-million loan.
The company will need that money as it tries to refresh its product line and grow sales, which have declined as American Apparel's once-hip offerings fell out of favor.
"With the enormous debt burden removed, we can now turn our full attention to our strategic turnaround, which will benefit our customers, vendors and employees," said Chief Executive Paula Schneider in a statement Friday. "This is the start of a new day at American Apparel."
The company, which had more than 250 shops at its height, has pared down its store count but has said it plans to open new ones in promising locations.
Staff writer Shan Li contributed to this report.