American Apparel Opens Final Takeover Fight With Founder Charney

LOS ANGELES, United States — American Apparel Inc.'s fired Chief Executive Officer Dov Charney spent Wednesday morning listening to his replacement describe the mess she said she found after taking the reins at the struggling clothing retailer.

At a hearing this week in Delaware bankruptcy court, Charney will try to persuade the judge to throw out the company’s proposed reorganization plan in favor of one that lets him return to the company he created.

Current CEO Paula Schneider got the first word as she took the stand in Wilmington to testify about the financial and organizational disarray she said she encountered last year when she was hired after the board ousted Charney. While Charney was in charge, too many managers needed his approval to do anything, she said.

“More than 70 people told me they reported to Dov,” Schneider told U.S. Bankruptcy Judge Brendan Shannon. To fix that, she had to “get people to get into their own lanes that we had to develop,” she said.

Charney is scheduled to testify to back up his claim that the board is sabotaging his effort to bring in buyers willing to improve on the Los Angeles-based company’s current reorganization plan. Under that proposal, senior lenders will trade their debt for control of the company, reducing company liabilities by about $200 million.

The case is In re American Apparel Inc., 15-bk-12055, U.S. Bankruptcy Court, District of Delaware (Wilmington).

By Steven Church; editors: Andrew Dunn, Joe Schneider.