US fashion chain American Apparel has filed for US bankruptcy protection.
The Los Angeles-based company, which runs 260 shops and concessions in 19 countries, said it had reached a restructuring deal with 95 per cent of its secured lenders to reduce its debts.
The firm added that the restructuring will take around six months, and its international stores will not be affected.
It has 18 stores and concessions in the UK including locations in Glasgow, Brighton, Leeds, London and Manchester.
American Apparel chief executive Paula Schneider said: “This restructuring will enable American Apparel to become a stronger, more vibrant company.”
She added that the move would allow the firm to “refocus our business efforts on the execution of our turnaround strategy.”
As a result of the deal, American Apparel’s lenders will write off about $200 million (£131m) of bonds in exchange for equity in the company, reducing its $300m debt to no more than $135m and cutting annual interest payments by $20m.
In August, the company flagged up problems with its finances, saying it might not have enough cash to keep the firm going for the next 12 months as losses widened.
The cult fashion brand makes all of its garment in the US, and trades on its “Made in Downtown LA” reputation.
The business was founded in 1989 by Canadian Dov Charney, who dropped out of college and borrowed $10,000 from his father to start the firm. The business first traded as a public company in 2007.
However, the firm fired Charney in December over a series of misconduct claims made against him.
In June the business was granted a restraining order against Charney, preventing him from making negative statements in the press about the company and from trying to get board members removed.