American Apparel Resolves Fabric Dispute With Dyehouse

After American Apparel filed a complaint in U.S. Bankruptcy Court to get back nearly 250,000 pounds of greige fabric from Tri-Star Dyeing & Finishing Co., the company has agreed to dye the fabric.

The fabric in question was sent to the dyeing facilities in Santa Fe Springs, Calif., before American Apparel filed for Chapter 11 bankruptcy protection on Nov. 14.

But Tri-Star refused to dye the rest of the fabric until American Apparel paid a $100,000 invoice issued for fabric dyed before the Los Angeles clothing manufacturer declared bankruptcy.

According to an American Apparel spokesperson, a “consensual resolution was reached and the parties continue to work together.”

In the Dec. 15 complaint, American Apparel noted that the undyed fabric, worth $500,000, was essential to completing orders promised to Gildan Activewear, the Canadian stalking-horse bidder, which has offered $66 million to buy American Apparel’s intellectual-property rights and its wholesale merchandise.

American Apparel said it contacted Tri-Star shortly after filing for bankruptcy protection and explained it could not immediately pay the dyeing and finishing company’s invoices sent before the bankruptcy filing.

In response, court documents said, Tri-Star changed its payment terms to cash on delivery and tried to increase the dyeing price by adding a $1-per-pound surcharge until Tri-Star received its $100,000. American Apparel said that in some cases the surcharge amounted to a 150 percent increase over the normal price.

American Apparel said it rejected the surcharge price increase and requested that its fabric be returned so it could use an alternative dyeing company to get the goods done in time to complete its orders. But days later, an agreement was worked out.

In other bankruptcy news, American Apparel has gotten the go-ahead from a bankruptcy judge to close nine stores around the country after promising landlords it would not hold big going-out-of-business sales beyond shopping-center hours. The stores should be closed by the end of the year.

The nine outposts are on Pacific Avenue in Santa Cruz, Calif.; M Street in Washington D.C.; Church Street in Evanston, Ill.; Sixth Avenue in Seattle; near Lenox Road in Atlanta; Central Expressway in Dallas; Main Street in Memphis; and Pacific and Cherry streets in Burlington, Vt.

The store closings, which will reduce American Apparel’s domestic store lineup to 98, are expected to bring in $600,000 from going-out-of-business sales.

Gildan Activewear has not bid for the retail stores, but American Apparel is hoping another buyer will pick up some of the locations.