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“A Case Study on American Apparel Bankruptcy” By Khalil, Maybin, Monalisha, Samreen, Sanyukta Under the Guidance of Dr. Sangeetha Vinod In (Partial) Fulfilment of the Requirements for the Degree of Bachelors of Business Administration SCHOOL OF BUSINES MANIPAL UNIVERSITY DUBAI November, 2015
Executive Summary The case taken into consideration is the case involving American apparel. Despite losing $750 million in shareholder value over the last seven years, a 2014 scandal, and myriad questions the company’s competitive prospects in an increasingly fickle market. Amidst sagging share prices, high-profile lawsuits, media coverage, and the restructuring that brought in five new members that were able to handle the situation. But this did not last for long as the company’s image was tarnished once again as there were some allegations towards the company being very sexist and used very exposing models for their clothing adverts portraying women in a negative way. The case study discusses these issues and helps us get an insight into the company’s problems and the solutions that were selected by people to stabilize these issues.
American Apparel Introduction of American apparel: American apparel was founded in 1989. The founder was DOV CHARNEY. The American apparel is the one of the biggest retail manufacturing company based on Los Angeles, California in United State. The product is clothing. The company has over 273 stores till 2010 December. American apparel is a worldwide company. The number of employees is 11300 till December 2011. Problem: The company did not make any profits from 2009 and the company got bankrupt. In United State chapter11 or tittle11 is the United State code for the bankruptcy. Tittle11 is available for individual’s sole proprietorship Partnership Corporation. American apparel is unable to pay their debt and their creditors file with federal bankruptcy court for the protection. In 2011 they have secured $14.9 million and right after that they have sold their share near about $15.8 million. In June, 2014 managing directors decided to ask the chairman or CEO of the company DOV CHARNEY to leave. Right after that Lion capital demanded their repayment of $10 million and company was default on $50 million with Capital One Financial. American apparel is tryingsa to avoid the bankruptcy and repay the loan of $15.8 million which was due in October 2015. The others retailers already informed to the management that they could have faced not having enough cash. Stakeholders’ perspective: Shareholders - The company's shareholders, depending on the type of stock they hold, may be entitled to a portion of the liquidated assets, if there are any left over after bankruptcy. However, the stock itself will become worthless, leaving shareholders unable to sell their defunct shares as it would be considered worthless. Therefore, in the case of corporate bankruptcy, the only recourse is to hope that there is money left over from the firm's liquidated assets to pay the shareholders.
Upon bankruptcy, a firm will be required to sell all of its assets and pay off all debts. The

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