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American Apparel CEO Gets Loan to Avoid Bankruptcy

In order to avoid filing for Chapter 11 bankruptcy, the CEO of American Apparel accepted a $45 million loan from a group of investors.

This was made possible by Michael Serruya, a Canadian financier who brokered the deal. If American Apparel had been forced to enter bankruptcy, the company would have had to reorganize and allow their main debtor, Charney, to take control of business operations. Although he makes a good candidate for this in terms of creative directions and products, as well as his business model, Charney is not known for making the best financial decisions.

The popular clothing company has been suffering serious financial woes since last year. The Los Angeles Times reported that declining sales and stock prices represented an $86 million loss for last year alone; projected sales for 2011 do not look much better. The stock price, which rested at $15 per share in 2007, fell sharply to just $0.78 in 2011.

It seems that internal turmoil is tearing the company apparent, especially on the Board of Directors. One member was quoted saying that, "You could say Dov has a history of spending money like a drunken sailor."

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