American Apparel gains court approval of bankruptcy loan

American Apparel witnessed a bright light in its ongoing financial saga.



The beleaguered specialty retailer has court approval to use the remainder of its $30 million bankruptcy loan. American Apparel filed Chapter 11 in November, its second filing in 15 months.



Judge Brendan Shannon of the U.S. Bankruptcy Court in Wilmington, Del., approved the financing package the chain received from post-bankruptcy lender Encina Business Credit, on Monday, Dec. 12. The approval stemmed from the retailer’s efforts to resolve issues with unsecured creditors, according to the Wall Street Journal.



While a final hearing approving American Apparel’s usage of the lender’s cash is pending for Jan. 12, the retailer will still have access to the funds on an interim basis. The loan was initially secured to fund the cost of its Chapter 11 case, the Wall Street Journal said.



Attorneys for unsecured creditors and pre bankruptcy lenders credit constructive negotiations for the decision, and the parties hope to reach a timely global settlement to avoid additional fees, the Journal reported.



The news comes on the heels of the retailer’s announcement to close up to nine under-performing stores by the end of December.