American Apparel is filing Chapter 11 bankruptcy protection.
The filing comes almost two years after the company ousted founder Dov Charney, who is locked in a legal fight and sued American Apparel for defamation.
The Los Angeles company said today that its US retail stores will continue to operate. International stores are not affected.
The plan will wipe out more than USD 200 million in bonds held by the retailer in exchange for equity interests. Lenders will provide about USD 90 million in debtor-in-possession financing.
American Apparel's board has approved the restructuring plan, which is expected to be completed in about six months. It still needs approvals from the bankruptcy court.
Shares of American Apparel Inc plunged more than 24 per cent in Monday premarket trading.
