(Filed Under Financial and General Interest News). In an apparent response to American Apparel’s March 31 filing with the SEC addressing the possibility of bankruptcy, and subsequent articles in the New York Times and other publications, company C.E.O. and majority stockholder Dov Charney said in a Tuesday interview with Counselor Magazine “We are not going bankrupt.” This news was also distributed through PR Newswire.
According to American Apparel, in the interview with Counselor Charney described reports that the company is unstable as inaccurate. “First of all, the announcement about us possibly seeking bankruptcy protection is something we did as an obligation to shareholders to explain that it’s a possibility, however remote,” he said in a statement, adding that while the company suffered net losses of $86.8 million in 2010 [compared with a profit of $1 million in 2009], its advertising specialty sales were only down 1 percent.
However, American Apparel’s own SEC filing is less optimistic. “If the company is not able to timely, successfully or efficiently implement the strategies that the company is pursuing to improve its operating performance and financial position, obtain alternative sources of capital or otherwise meet its liquidity needs, the company may need to voluntarily seek protection under Chapter 11 of the U.S. Bankruptcy code,” it reads.
Last Friday, the New York Times ran a story in its Dealbook column with the headline “American Apparel Warns of Bankruptcy.” The article said the company has experienced a difficult year, with cash flow negative and sales among young urban consumers, its target audience, lagging. The article added that the company is predicting similar results this year.
In addition to company financial troubles, four former employees have filed sexual harassment lawsuits against Charney, known as a controversial figure, in the last month. Irene Morales filed a suit with the Brooklyn Supreme Court on March 9, followed by a suit filed by Kimbra Lo with the Los Angeles Superior Court on March 23, which also named former employees Alyssa Ferguson, Marissa Wilson and Tesa Lubams-Dehaven. Charney’s lawyers and American Apparel have denied all of these allegations.
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