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Dov Charney makes bid to take company out of bankruptcy

Could Dov Charney get his company back?

That is the question analysts are contemplating after it was announced that the former CEO of American Apparel was working with a new team of investors in an attempt to place a bid for the Los Angeles based company that sought Chapter 11 bankruptcy protection last October.

Charney first founded the company in 1998, and was essentially branded as part of the problem as it experienced tremendous financial difficulties in the years before the bankruptcy was filed. He was accused of misappropriating corporate funds and sexual harassment, which ultimately led to his ouster.

According to a recent Bloomberg News report, Charney, along with unnamed investors, apparently has a reorganization plan that is superior to the current plan before the court. Specifically, Charney’s plan will ostensibly leave the company with much more liquidity, does not require any funding contingencies, and has been properly vetted for due diligence.

It remains to be seen whether American Apparel’s creditors will accept the plan. If they do, Mr. Charney will return to the company in some capacity. It is doubtful that he will return as CEO. Nevertheless, it will culminate an extraordinary comeback for a person who was essentially the scapegoat for the company’s demise, even though the company continued to falter after he was suspended.

The story exemplifies the need for experienced legal counsel in corporate bankruptcies, whether you are a company that is seeking protection (and an appropriate reorganization plan) or you are making a bid for an embattled company. 

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