BUSINESS POLICY I-CURRENT EVENTS GUIDELINE

BUSINESS POLICY I-CURRENT EVENTS GUIDELINE
GENERAL OVERVIEW: Use and combine both of the current events articles provided

o Write a 400-word essay that must include:
 Introduction-a thesis that is clear, related to the article and focused on the material covered in class.
 1 or 2 paragraphs, each paragraph has thoughtful supporting detail sentences that develop the main idea.
 Conclusion- YOUR OPINION on how this event has impacted this business’ strategies, or how an external event will impact an industry or specific business. I will be looking for key word and buisness alike terms s learned from the chapters discussed—relate it to the material we cover in class.
PROCEDURE:
o Use MLA format.
o All assignments must be double spaced and type written using a size 12 legible font such as Ariel or Times New Roman.
o Upload the assignment to the dropbox and make sure you have a link to the original article.
o Ensure that the date of the article is clearly identifiable
o DO NOT PLAGIARIZE THE ARTICLE OR ANY OTHER PERSON’S WORK, INCLUDING YOUR FRIENDS!!

GRADING: The assignment will be graded as follows:

Attention to assignment parameters 20%
Article Chosen—date/content 20%
Paper/Original Thought/Impact/Relation to course material 40%
Grammar/Spelling/Punctuation 20%

TOTAL 100%

ARTICLE #1

Nasty Gal Bankruptcy Heats Up as Lender Lashes Out
The company’s pre-petition lender has challenged its emergency motion to use a loan, alleging Nasty Gal rushed into a bankruptcy and is in “liquidation mode.”
By Kari Hamanaka on November 11, 2016
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The Nasty Gal store on Melrose Avenue
Courtesy Photo
LOS ANGELES—Nasty Gal’s lender is pushing back at the e-tailer’s emergency request to tap a loan just two days into its bankruptcy filing.
The objection, filed in court Friday by Hercules Technology Growth Capital Inc.—the Palo Alto lender to venture-backed firms that supplied pre-petition financing to the Los Angeles e-tailer—is crying wolf at the picture painted by the company to support its request to tap a $20 million loan to continue operating the business.
Lawyers for Hercules allege in the motion that Nasty Gal rejected additional liquidity proposals that would have helped it avoid a bankruptcy and “instead chose to rush headlong into an ill-advised and unfocused Chapter 11 proceeding that will kill its brand, destroy its already damaged vendor relationship, burn valuable cash collateral without adequately replacing it, and result in a liquidation at much more depressed values for all constituents….”
The motion went on to express disbelief at the idea of continuing a sale process into the bankruptcy, “the timing of which is highly curious and perhaps unprecedented for a retailer—leading into the height of the holiday selling season, after declaring war with its senior secured creditor and with no ability to purchase sufficient replacement inventory.”
A spokesman for Nasty Gal could not immediately be reached for comment.
WWD reported in September the company had been shopping for a buyer, with Revolve Clothing rumored to have looked at the business, but a suitor could not be found.
Nasty Gal asked a judge to rush approval to tap its loan to at least handle immediate expenses such as the looming Nov. 25 payroll expense of $512,000 across its 189 employees, along with about $400,000 it spends weekly on merchandise to stock its online shop and physical doors sitting on Melrose Avenue and Third Street Promenade.
The business has been challenged in more recent years, with president and chief restructuring officer Joe Scirocco saying in his declaration filed Thursday that the company had trouble scaling in line with its rapid growth and also more recently saw the compression of international sales.
Executives have apparently come and gone from the board with Hercules casting it as “a revolving door of resignations as equity holders and even the company’s founder have abandoned it following years of losses….”
Founder Sophia Amoruso is reportedly expected to step down as executive chairman of the board. She left the chief executive officer position in early 2015 when the company tapped former Lululemon executive Sheree Waterson to the top spot.
Results for the 12 months through Jan. 31, 2015 included revenue of $85 million and an earnings before interest, taxes, depreciation and amortization loss of $6.3 million, according to court documents. The following year ended Jan. 30, 2016 saw net revenue fall to $77.1 million and negative EBITDA of $15.4 million.
However, Scirocco said projections for the current fiscal year ending Jan. 27 would see the EBITDA loss narrow to $1.4 million on net revenue of $77 million.
He also estimated the company’s going concern value at about $25 million, which Hercules called out as being “based on some multiple of speculative future EBITDA” and goes on to allege Nasty Gal was never profitable.
The lender also seemed skeptical of the company’s ability to successfully emerge from a restructuring saying in its motion, “The [company] is already in liquidation mode and Chapter 11 filing with standard first day motions do not mean that a real reorganization is under way or achievable under these circumstances.”
The firm requested a judge set the final hearing on the matter for Nov. 28.

ARTICLE #2
American Apparel Facility Review Begins, Uncertainty Looms for Workers
The company’s head of human resources attempted to address employee concerns in a letter sent out Thursday, with many questions to go unanswered until a sale closes.
By Kari Hamanaka on November 17, 2016
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Inside American Apparel’s downtown Los Angeles factory.
Kari Hamanaka
LOS ANGELES — The review process on American Apparel LLC’s facilities has begun as workers sit in limbo waiting to hear about the state of their jobs.
The Los Angeles firm’s second bankruptcy filing Monday, paired with the announcement that Montreal-based Gildan Activewear Inc. has proposed to pay $66 million for the intellectual property and some of its assets, leaves many questions about what’s to come of American Apparel’s workforce.
Craig Simmons, the company’s head of human resources, attempted to stave off fears of any mass cuts Thursday afternoon in a letter sent to workers with updates on the possible sale to Gildan, which becomes the stalking horse bidder in a bankruptcy auction that has the potential to shake loose additional suitors for the firm, along with a buyer for the company’s retail operations.
Simmons, American Apparel chief executive officer Chelsea Grayson and head of supply chain and manufacturing Kurt Messenger toured the company’s facilities this week with Gildan executives as the Canadian firm begins a facility review process that will lead to decisions about what shape the business would take if a Gildan deal goes through.
“I realize that there is some uncertainty right now, so I wanted to make one thing very clear: you are the key to keeping the business running until we are able to close a deal that secures American Apparel’s future,” Simmons said in his letter to employees. “You are who the management team has always relied on, and who we hope to continue to depend on through this process. Each one of you is American Apparel.”
Simmons also confirmed salaries, hours and benefits would not change and confirmed the stores remain open with “ongoing discussions about what the retail business will look like in the future.”
What happens with the workforce rests on the outcome of the sale, with some 3,457 workers across the company’s downtown Los Angeles headquarters, South Gate cutting and sewing facility and Garden Grove knit and dye house alerted seven days before the bankruptcy and Gildan deal announcement of possible facility closures, according to filings made with the state’s Employment Development Department Nov. 7 and an internal letter obtained by WWD that was sent out to headquarters workers that same day.
A spokeswoman for the firm called the notices “a precautionary measure in case of workforce reductions associated with a potential transaction,” given the uncertainty of the sale’s terms.
If all or some of those jobs are lost, the question then is whether Los Angeles’ apparel manufacturing industry can absorb some or all of those jobs.
Ilse Metchek, president of the California Fashion Association, expressed some doubt.
“Manufacturers for the most part are looking elsewhere than L.A. That’s a fact,” she said. “These [American Apparel] workers, for the most part, are used to large factory, automated operations. What we do have in Los Angeles and, successfully, are smaller boutique operations where there’s not more than 20 machines and they are cross-trained and do everything in that factory, from sewing buttons to putting on waistbands. That’s not the structure of a corporate factory.”
Gildan spokesman Garry Bell confirmed to WWD Monday the company is considering taking over the leases on the South Gate and Garden Grove facilities but the downtown headquarters — where the bulk of the workforce is located — is not part of the sale agreement beyond some equipment in the building. He also confirmed there are no provisions in the agreement related to American Apparel’s workforce but also tempered that with the reality that the bankruptcy and sale process have only just begun.
“The short answer is we really don’t know at this point without having gone through the evaluation [of the assets] and have the bankruptcy run its course,” Bell said when asked what Gildan plans to do with the employees. “It’d be premature for us to give any kind of direction in relation to the workforce.”
Sources close to the company said Thursday manufacturing is now part of the Gildan deal across the company’s three remaining factories in addition to consideration of the distribution center in La Mirada. That’s alongside bids being considered on the retail component of the business.
Gildan currently has no manufacturing presence in the Los Angeles area, with yarn-spinning facilities in North Carolina and Georgia, a dye house in Massachusetts and socks and sheers facilities in Montreal and North Carolina. The rest of the manufacturing operations are scattered throughout Central America, the Caribbean, Mexico and Asia.
Meantime, the American Apparel bankruptcy process rolls on with the judge overseeing the company’s case today signing an order allowing it to tap on an interim basis $10 million of $30 million in debtor-in-possession funding from Encina Business Credit LLC until a final hearing occurs as it gears up for an auction.
And then there’s always the Dov Charney factor. The American Apparel founder and former ceo, who aligned with others to try to buy the company twice — once just before his firing for $550 million and another bid following his ouster for $300 million. Charney was vilified among some camps as the vehicle that got the company into its mess — something he has vehemently denied — but he could always turn into the white knight of this saga. Although, even he has doubts about such an outcome.
Charney, reached by phone Wednesday, said he’d consider making a bid if he could align with partners who would give him half the company and another half if he met certain performance targets. In other words, a scenario so outlandish as to be more than unlikely.
“If it was an unbelievable deal,” he said. “But no one’s knocking on my door