Less than a year after emerging from bankruptcy under new leadership, American Apparel has again filed for Chapter 11 protection.

The filing came just after midnight Eastern Standard Time Monday morning. American Apparel faced a $2 million payment due Tuesday to FTI Consulting Inc. that likely spurred the filing, according to several sources who asked not to be named because they weren’t authorized to speak publicly. The company had been exploring a sale to several branding firms in recent weeks, but couldn’t find a buyer.

In its filing in Delaware bankruptcy court the downtown clothing manufacturer and retailer said it had $230 million in debt. A declaration filed by the company’s restructuring chief, Mark Weinsten, said American Apparel was seeking to auction off its assets by the end of the year.

The company does have a $66 million stalking horse bid in place from Canadian clothing manufacturer Gildan Activewear. Gildan’s bid is for American Apparel’s intellectual property and a least some portion of its wholesale business. Gildan also “negotiated for the opportunity” to maintain some or all of American Apparel’s manufacturing, distribution, and warehouse operations in Los Angeles.

Bradley Scher, American Apparel’s chairman, told employees in a letter obtained by the Daily Journal that Gildan’s potential acquisition of parts of the company was a way to keep the brand alive.

“We are confident that this decision is the best strategic move forward, in order to preserve the legacy of the American Apparel brand,” Scher’s letter reads.

A company representative declined to comment.

The Weinsten declaration details the company’s spectacular decline since it fired American Apparel founder Dov Charney in December 2014. Even after last October’s initial bankruptcy filing, which helped reduce the company’s $300 million in debt and streamline operations, the company continued to hemorrhage money. Year-over-year sales are down more than 32 percent thus far, according to the declaration, and the company’s earnings before interest, taxes, depreciation, and amortization declined by a whopping $40 million from 2015.

The company only stayed afloat in 2016 for as long as it did by leaning heavily on lenders that supplied it with additional capital – some $122 million, according to filings.

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American Apparel lists New York-based Monarch Capital Group as its largest shareholder, with more than 41 percent of the company controlled through various Monarch funds. Goldman Sachs is listed as the next-biggest equity stakeholder with more than 20 percent.

The biggest unsecured creditor listed in American Apparel’s bankruptcy filing is UK-based Standard General, who is owed more than $15 million by the company. FTI’s $2 million is the second-biggest unsecured sum.

The bankruptcy filing comes 13 months after the company last sought protection in the wake of several years of declining sales and the Charney management shake-up. The company was able to put a plan together an exit plan in February, but it appears the initial restructuring wasn’t enough to overcome the steep decline in sales.

Deals & Dealmakers reporter Henry Meier can be reached at hmeier@labusinessjournal.com. Follow him on Twitter @henry_meier.

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