American Apparel: What goes around, comes around?

If financial figures are anything to go by, American Apparel is on a downward trajectory from which there may be no turning back.

The once beloved retailer known for its basic tees and tongue-in-cheek advertising no longer has enough reserves to keep operating for the next 12 months.

On the verge of bankruptcy

Worse, last week the Los Angeles-based company said it was on the verge of bankruptcy, with losses announced on Monday widening its already growing debts.

Low sales projections for the coming four quarters may mean the company's creditors will no longer be agreeable to give extentions to their loan repayments.

All that comes as the company saw its sales dwindle a further 17 percent.

The company is due to pay a 15.4 million dollar bond payment this October, however if you add the estimated 3.6 million dollars in legal bills from its lawsuit with founder and former CEO Dov Charney, and the 34 million dollars it owes the federal government, bankruptcy may be a better option.

The 16-year old retailer is apparently in discussions with Capital One to try to find a waiver for the federal government bill, citing its current lack of cash reserves.

In another strange turn, American Apparel's ousted founder Charney has been named as a potential buyer should the company go under. Perhaps this is a case of what goes around comes around?

image:Amercican Appare