American Apparel has filed for bankruptcy protection in the US, less than two months after the business warned it could cease trading within a year.
The US retailer, which has 19 stores in the UK and one in Dublin, has reached a restructuring deal with 95% of its secured lenders to reduce its debts.
It made a net loss of $19.4m (£12.4m) in the three months to June 30, up from $16.2m (£10.3m) in the same period last year.
Lenders will write off more than $200m (£131m) of bonds in exchange for equity in the company, reducing its $300m (£197m) debt to no more than $135m (£89m) and cutting annual interest payments by $20m (£13m).
The retailer stressed its retail, wholesale and manufacturing operations will continue without interruption and its international operations are not affected by the reorganisation in the US.
American Apparel chief executive Paula Schneider said: “By improving our financial footing, we will be able to refocus our business efforts on the execution of our turnaround strategy as we look to create new and relevant products, launch new design and merchandising initiatives, invest in new stores, grow our e-commerce business, and create captivating new marketing campaigns that will help drive our business forward.”