The court blocked the $300m offer made in December 2014 and allowed American Apparel to end the bankruptcy proceedings which it had initiated in October last year, according to various media reports.
Earlier this month Hagan, Silver Creek and Charney’s bid was also rejected by American Apparel’s board of directors.
The court decision will enable hedge funds to take control of the business when the insolvency procedure has been completed and implement a revamp plan for the chain, currently including more than 200 stores.
Under the plan, American Apparel is expected to return to profitability in 2018. This will be the first time the business would return a profit since 2009, when it was bought out by London-based private equity investor Loin Capital. The consumer-focused firm held its investment in the US clothing chain till April 2013.
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