Struggling clothing retailer American Apparel has been delaying payments to its suppliers by as many as 60 days. The company is trying to avoid a cash crunch following a not-as-good-as-expected holiday season, reported the New York Post.
According to insiders, vendors for the yarn and fabrics are being turned away by factoring companies that finance shipments to its California factories. In the meantime, firms are getting increasingly nervous about American Apparel's liquidity.
"They keep reducing the amount of availability to manufacturers and vendors to American Apparel," Jerome Reisman, a partner at Reisman Peirez Reisman Capobianco, a law firm whose clients include factors, told the New York Post. "They don't want to take the receivables because American Apparel's not paying their bills [on time]."
An American Apparel spokesperson refuted the statement, saying that liquidity was better than it had been in a long time and that recent holiday sales promotions were on track.
At the beginning of 2014, American Apparel announced that it had put together a team of restructuring advisers as it struggled with mounting losses, slowing sales and a hefty debt load. The retailer enlisted lawyers at Skadden, Arps, Slate, and Meagher & Flom to help the company work through turnaround ideas.
The company has cut costs this year to meet its goals to generate cash, but times have been tough due to restructuring costs and legal bills related to the suspension and the firing of founder Dov Charney.
On Dec. 16, American Apparel officially terminated Charney from his position as CEO and named Paula Schneider to fill the role. Charney was initially removed from the job in June for misconduct.
-See this New York Post article
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