American Apparel shares surge on news of sale

(CNN) — The ailing and unprofitable Michael Kors brand has replaced Macy’s as the biggest shoe to hit the Big Board.

American Apparel and founder Dov Charney’s controversial sale of the company he founded was settled in December, and a deal to take back the company was announced earlier this week.

Now, American Apparel-maker Authentic Brands Group has announced it has postponed its $100 million initial public offering and is looking to sell its stake in Michael Kors.

The company owns the Fred and William Rast brands, which provide distressed and vintage-inspired clothing, and was hoping to raise money by bringing the brands to the capital markets.

It had been in talks with investment banks about an IPO, but told CNN Business on Friday it had decided to sell its stake to outsiders in lieu of a public listing.

J.P. Morgan, Deutsche Bank and Citi are still working on IPOs, but Authentic Brands Group is now seeking to find a buyer to scoop up all its shares at some point this year.

Still, stock in the company rose 13% in premarket trading.

While American Apparel and its 1990s dotcom-era namesake have been performing poorly in recent years, company founder and chief executive Riccardo Zacconi told CNN Business it has been profitable and cash-flow positive.

But those positives are the least of the company’s problems.

The apparel and accessories maker is saddled with more than $2 billion in debt — bad enough to cause the collapse of competitor American Apparel.

This became an issue in October when a group of creditors that included the embattled retailer’s founder Kors filed a lawsuit accusing American Apparel of not paying an $8.8 million portion of its debt in full and on time.

Macy’s has also suffered from a string of missteps lately.

After going public in 1999, it had to file for bankruptcy in 2014 and again in 2017. The embattled department store pulled off another bankruptcy filing on February 12.

It reported a $2.8 billion loss in 2018, down from $3.3 billion the year before.

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