Dive Brief:

• American Apparel founder Dov Charney Monday failed to win over a bankruptcy judge overseeing the retailer’s Chapter 11 restructuring, who ruled in favor of a plan that will give reorganization control to American Apparel's senior lenders. 

• The plan put forward by the retailer and approved by its stakeholders will slim its debt by some $200 million and be the foundation of its turnaround. Lenders including Monarch Alternative Capital LP are exchanging their debt for control of the retailer.

• Investment firms Hagan Capital Group and Silver Creek had offered a $300 million bid that tops the value range that American Apparel’s investment bank estimated in court documents, but it also came with the stipulation that Charney would return. 

Dive Insight:

U.S. Bankruptcy Judge Brendan Shannon said that Charney’s argument boiled down to the idea that the retailer couldn’t survive without him, an argument he rejected. In addition, the retailer’s creditors were backing the retailer’s own plan, something that carries great weight in Chapter 11 proceedings, compared to an auction. 

“I have no doubt that [Charney] wants only the best for American Apparel and especially for its thousands of employees,” Shannon said Monday. 

The decision leaves American Apparel, which has once again committed to keep its manufacturing in the U.S. (a key aspect of the business begun, championed, and protected by Charney when he was there) to pursue its own turnaround plans. It remains to be seen how the company fares without the vision of its controversial founder. They’ll continue to wrestle with Charney in court, though, as he says he’s not finished with litigation against them.

“The question is: Is there life for American Apparel after Dov Charney,” Lloyd Greif, CEO of investment banking firm Greif & Co, told the Los Angeles Times. “The final chapter hasn't been written.” 

Charney and the investment partners that backed him during this process say they have plans to possibly start another retail company, and hinted that American Apparel itself could yet be part of their future.

“We are backing Dov on a new venture,” Chad Hagan of Hagan Capital Group told Bloomberg. “We will keep an eye out on American Apparel and see what happens with the brand. Ideally, if we can pick it up down the road, we will.”