A bankruptcy filing by Dov Charney will not affect the operations of Los Angeles Apparel (asi/67971), a domestic manufacturer and supplier of apparel to retailers and the promotional products industry, a source close to the matter told ASI Media.

Charney, the founder of American Apparel and Los Angeles Apparel, has filed for bankruptcy in U.S. Bankruptcy Court, District of Delaware. Arya’s Vintage Closet, a clothing store Charney operates in Costa Mesa, CA, also filed for bankruptcy.

Dov Charney, Los Angeles Apparel

Still, the bankruptcies will not affect Los Angeles Apparel, the LA-based clothier Charney started in 2016 after being ousted from American Apparel, the iconic but controversial supplier/apparel brand he founded and that at one point was a $600 million business with stores around the world.

Charney is listed as a senior partner in Los Angeles Apparel, but does not own it, sources noted. Charney has no connection to American Apparel anymore and hasn’t for years, meaning his bankruptcy will also not affect that brand.

Top 40 promo products supplier Gildan purchased American Apparel’s intellectual property rights and some equipment out of bankruptcy auction about five years ago. Montreal-headquartered Gildan continues to own the American Apparel brand.

Charney’s bankruptcy is the result of continued fallout from the saga that enveloped American Apparel as it crashed from a Top 40 supplier and globally known clothing brand into two bankruptcies, the first of which occurred in 2015.

In 2017, a judge in Delaware ruled that Charney was obligated to pay hedge fund Standard General LP $20 million, plus interest – a debt incurred during an unsuccessful attempt by Charney to reclaim control of American Apparel. With the interest, the money owed amounted to about $30 million.

The debt remained a millstone for Charney – a reality that ultimately compelled his personal bankruptcy filing. The bankruptcy protection enables Charney to stop debt-collection efforts and gives him time to create a viable plan to repay as much as the money owed to Standard General as possible.

Charney, once one of the promo industry’s most high-profile executives and the 2004 Counselor Person of the Year, built a winner with American Apparel – a brand known for its Made-in-America manufacturing and fashionable apparel basics as much as it was for its risqué marketing and advertising. Charney took American Apparel public in 2007, but within a few years the company reportedly began losing money.

Charney ultimately lost control of American Apparel. In June of 2014, the company’s board of directors ousted Charney from his CEO position for alleged misconduct and purported violations of company policy. In December of the same year, after an investigation Charney has previously called a sham, the board fired the founder from his role as a consultant. He would seek financing from Standard General to get the company back, but the plan didn’t work out.

According to the bankruptcy petition filed last week, Charney has assets and debts of as much as $50 million each. 

A lawyer for Charney told Bloomberg that Charney plans to reorganize Arya’s Vintage Closet while under court protection and arrange a loan to finance the company’s expansion.