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Troubled clothes retailer American Apparel has filed for US bankruptcy protection.

It said it had reached a restructuring support agreement with 95% of its secured lenders.

American Apparel, which has been trying to turnaround its business, has seen falling sales and recorded a loss of $19.4m (£12.8m) in the second quarter.

The firm has also been involved in a drawn-out legal battle with its founder Dov Charney over misconduct claims.

Cutting debt

American Apparel chief executive Paula Schneider said: “This restructuring will enable American Apparel to become a stronger, more vibrant company.”

Under the restructuring agreement, American Apparel’s secured lenders will provide about $90m in financing, the company said.

It expects to cut its debt to $135m from $300m through the restructuring, with the programme set to be completed within six months.

The firm said it would continue to operate its retail stores, wholesale and US manufacturing operations throughout the process.

It has 18 stores and concessions in the UK including locations in London, Leeds, Glasgow, Manchester and Brighton.

The Los Angeles-based retailer, known for making its products in the US, has not turned a profit since 2009.

In August, the company flagged up problems with its finances, saying it might not have enough capital to keep operations going for the next 12 months as losses widened and cash flows turned negative.

American Apparel was founded in 1989 by Dov Charney. The firm fired Mr Charney in December over misconduct claims, and in June it was granted a restraining order against him.

‘Big loser’

Rapidly falling sales, debt, and several management crises have “finally proven too much for the iconic teen retailer” said Neil Saunders of retail analysis firm Conlumino.

“Bankruptcy protection is, in our view, the only viable option for American Apparel which is crippled by $311m of debt and is subject to a number of corporate lawsuits, including those brought by its founder Dov Charney,” he said.

“Arguably, the big loser will be… Dov Charney, who will not only see his legal proceedings delayed but will also find, along with other shareholders, his holding in the company – currently worth some $8.2m – wiped out,” he added.