After having filed a complaint in the US Bankruptcy Court to retrieve nearly 250,000 pounds of greige fabric from Tri-Star Dyeing & Finishing, American Apparel has agreed to dye the fabric. The fabric in question was sent to the dyeing facilities in Santa Fe Springs, California before American Apparel filed for Chapter 11 bankruptcy protection on November 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 have decided to work together.
In the December 15 complaint, American Apparel noted that the undyed fabric worth $500,000 was essential for completing the orders promised to Gildan Activewear, the Canadian stalking horse bidder that 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, 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 it received its $100,000. American Apparel said that in some cases the surcharge amounted to a 150 per cent increase over the normal price. American Apparel said that 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.