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American Apparel says it will turn profitable in 2018

American Apparel, which has filed for bankruptcy, predicted that its fortunes would improve in three years. Above, the company's factory in Los Angeles.
(David McNew / Getty Images)

American Apparel, the struggling clothing maker that filed for Chapter 11 bankruptcy protection last week, said it would become profitable in 2018.

The Los Angeles company predicts that its reorganization plan -- designed to shed heavy debts and interest payments -- will help turn its fortunes around in three years, according to a Thursday filing with the Bankruptcy Court in Delaware.

American Apparel has suffered net losses totaling nearly $384 million over the last 5 1/2 years. But under its plan, the company said its net income would be $6 million in 2018. By 2020, American Apparel predicted that it would pull in a profit of $23.7 million.

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The clothing manufacturer and retailer said last week that it had reached a deal with 95% of its secured creditors. If approved, the restructuring agreement would hand nearly 100% of control to its largest bondholders, while leaving shareholders like ousted Chief Executive Dov Charney with nothing.

Charney could still delay -- or even possibly derail -- the proceedings in Bankruptcy Court, experts said. He was fired last year after an investigation into alleged inappropriate behavior and misuse of company funds. Charney has denied the allegations.

American Apparel warned Thursday that Charney could continue to be a risk to the business. The company has already “incurred substantial expenses” in relation to Charney, including investigations into his behavior and lawsuits that he has brought against American Apparel.

The company “can provide no assurance that Mr. Charney’s termination and his related conduct will not have a material adverse impact on New American Apparel,” the filing said.

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Charney declined to comment.

Shareholders have less standing than secured and unsecured lenders, experts said, because stocks are essentially gambles that may not pay off. Even if shareholders object, the judge can still approve the plan.

Follow Shan Li on Twitter @ByShanLi

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