Clothing retailer American Apparel has filed for bankruptcy protection in Delaware for the second time in little over a year.
Canada's Gildan Activewear (GIL) on Monday disclosed the bankruptcy filing alongside an agreement to buy the worldwide intellectual property rights of the American Apparel brand for roughly $66 million in cash.
Gildan's offer would serve as a stalking-horse bid in a Section 363 auction of American Apparel's assets.
"Gildan will be entitled to a breakup fee and certain expense reimbursements if it does not prevail as the successful bidder at any such auction," the company said.
American Apparel had not filed a bidding procedures motion with the U.S. Bankruptcy Court for the District of Delaware in Wilmington as of Monday morning, so details of the proposed bid protections were unclear. Court papers show, however, that American Apparel looks to hold an auction on Dec. 21 and a sale hearing on Dec. 30.
Gildan manufacturers cotton wear, including T-shirts, underwear, socks and sport shirts, for its own brands and also has license agreements with New Balance and Under Armour (UA) .
The Montreal company said it would separately purchase inventory from American Apparel "to ensure seamless supply of goods in the printwear channel while the company integrates the brand."
Gildan will not buy any retail stores.
It anticipated the transaction would close in the first quarter of 2017.
American Apparel plans to fund operations through a sale with a $30 million revolving debtor-in-possession loan from lenders led by Encina Business Credit.