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Mounting losses prompt bankruptcy filing by American Apparel

Retailer will keep operating while restructuring debt.

October 5, 2015

Following years of losses clothing retailer American Apparel is now filing for bankruptcy protection and is striving to get debt under control. The Chapter 11 action comes on the heels of the company ousting its founder, Dov Charney, last year.

The retailer plans to continue operating during the restructuring period, according to a Bloombergreport.

The move is a "difficult decision that gives American Apparel the opportunity to rebuild the business," Bryan Roberts, a Kantar Retail analyst, told Bloomberg. "Quite a few U.S. retailers have gone down this route and come out the other side."

The company has steadily been losing money for the past five years, and as of June had $161 million more liabilities than assets, reports Bloomberg.

The plan is to acquire new credit support to keep operating and cut debt to under $135 million and decrease annual interest cost by $20 million, according to Bloomberg.

"By improving our financial footing, we will be able to refocus our business efforts on the execution of our turnaround strategy," CEO Paula Schneider said in a statement.