Lefkovitz & Lefkovitz
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Bankruptcy protection for American retailer Aeropostale

Tennessee shoppers should be aware that clothing retailer Aeropostale has filed for bankruptcy protection. The company filed for Chapter 11 bankruptcy protection on May 4 after seeing a steady decline in sales. It was known for its basic designs in a variety of colors, but trend-based retailers such as H&M and Forever 21 have provided significant competition.

Aeropostale is set to close about 15 percent of its 739 stores around the country. The company hopes to use bankruptcy protection to reduce its debt and restructure its business, but a company sale is possible. Bankruptcy is typically a temporary solution for this type of a situation, according to the CEO of a retail analytics firm. While the company needs room to restructure, rebranding could be its only hope of survival in a competitive retail market.

Traditional retailers of teen clothing, such as Abercrombie & Fitch and American Eagle Outfitters have been more successful at moving similar merchandise. One expert suggested that the lack of variety in Aeropostale's apparel offerings could be to blame for its stagnating sales. Aeropostale has secured $160 million in bankruptcy financing from Crystal Financial. The company reported $390 million in debts and only $354 million in assets.

Chapter 11 bankruptcy requires a business filer to come up with a debt reorganization plan that is subject to court and creditor approval. Attorneys who have experience with these types of matters can assist in preparing the plan and in attending meetings with creditors to answer any questions that they may have and attempt to counter any objections.

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