It’s over for Dov Charney.
A US judge just ruled in favour of American Apparel’s plan to exit bankruptcy, The Los Angeles Times reports. That puts the kibosh on founder and former CEO Dov Charney’s plan to take over the brand he made famous.
“I am obviously disappointed by the judge’s decision to confirm the debtors’ reorganization plan and hand ownership of American Apparel to its bondholders,” Charney told Business Insider in a statement. “This outcome is one that I have been working tirelessly to avoid for nearly two years in an effort to protect value for the company’s various stakeholders. Now all stockholders will have their shares and value extinguished.”
Charney announced last week that he planned to prepare a $300 million bid to buy the company.
Charney was backed by Hagan Capital Group and Silver Creek Capital Partners, and their private equity unit PressPlay Group, according to a press release seen by Business Insider.
The current CEO, Paula Schneider, opposed the bid. She told her employees in a letter addressing their union drive that, “Neither the board of directors nor the intended new owners will EVER allow Dov to return to the company.”
The company previously rejected a bid from Charney in December that valued the company at $200 million. The company is currently controlled by its debt holders, who include Standard General, Monarch Alternative Capital, Coliseum Capital, Goldman Sachs, and Pentwater Capital Management.
They unanimously voted to reject Charney’s plan, according to a statement from the company, and to continue with their own reorganisation, which involves an extra $40 million credit line.
Charney was forced out his company in a boardroom coup back in June 2014. The board claimed at the time it had grown tired of the cost of settling sexual harassment lawsuits brought against Charney by his former employees and models. Charney, however, believes the motive was financial.
The company’s sales went into an immediate nosedive and it filed for bankruptcy months later. Under Charney, sales had peaked at $600 million annually. Under new CEO Paula Schneider, the chain was making only $135 million per quarter in revenues, a decline of approximately 19%.
Charney’s theory is that his company was essentially stolen from him: The former CFO of the company came to believe that American Apparel could be sold at a greater value if Charney was removed and plotted behind Charney’s back; and investor Standard General saw an opportunity to gain a controlling stake in the company once it was weakened by the loss of its founder, Charney has alleged in court papers.
He believes the latest decision will bring American Apparel closer to death.
“The sad reality is that American Apparel, the largest garment manufacturer in the United States, will not survive at this pace and I don’t believe the current management has the talent to bring it back to health,” he said in a statement.
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