Little Falls, NJ - Setember 14, 2010

It appears that the end is near for American Apparel. As of today it looks like the company will not be able to sustain its operation unless another dark angel recues this vile entity.  There will be few tears shed in the apparel sector as competitors vie for the faltering concerns market share.

American Apparel’s Dov Charney, is one of the most despised CEO’s in the United States. Most consumers of the company’s custom t-shirts are unaware of Chaney’s sordid rise to fame. Charney has built his empire on sleaze – period. But apparently the sleaze factor in the custom t-shirts market can only carry one so far. Gildan Activewear currently controls over 60% of the custom tee shirt sales in the USA but has not found it necessary to feature nearly naked nubile girls in its advertising.

Tragically, many families will experience a lost income if American Apparel does in-fact go bankrupt and there are few jobs if any in the custom tee shirt sewing business in the USA. The company has been under the scrutiny of the federal government for years over its hiring practices and has faced numerous investigations into the legal status of its work force. This is not a good company and it is run by a not so good guy.

Now the company’s troubles appear to have taken a legal turn.

American Apparel said in a regulatory filing that it had received a subpoena from the United States attorney’s office for the Southern District of New York and inquiries from the Securities and Exchange Commission over the resignation of Deloitte & Touche as the company’s independent auditor.

The company disclosed last month that Deloitte had raised concerns about “material weaknesses” in its financial controls dating back to last year.

American Apparel has yet to file an official second-quarter report with the NYSE Amex Equities, and warned that it might be delisted for noncompliance.

It also cautioned that it risked falling out of compliance with a loan provided by the British private equity firm Lion Capital, raising questions about its ability to remain a going concern. American Apparel had received an $80 million rescue loan from Lion in March 2009 to avoid defaulting on debt owed to an investment firm affiliated with Michael S. Dell. In exchange, the company gave Lion an 18 percent stake and two board seats.

Falling afoul of the Lion loan could lead to defaults on American Apparel’s other obligations, though the company said it was working with its lenders to amend the terms of those loans.

Watch for possible shortages in the Hanes and Gildan fashion tee shirts if American Apparel files for bankruptcy and ceases operations. American Apparel owns less than one-percent of the US custom t-shirt market but the company’s demise will be felt. Despite our disdain for this company and Dov Charney, American Apparel has changed the face of the custom t-shirt industry.

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