American Apparel battling to avoid bankruptcy as debt payment looms

American Apparel is facing a race against time to stave off bankruptcy as the retailer scrambles to raise money to pay down $15.4m of debt due in October.

The troubled fashion firm is understood to be struggling to find the funds as it prepares to report a torrid set of financial results in the coming weeks.

The company did not respond to requests for comment, but earlier in July American Apparel issued a statement saying: "Even if American Apparel increases revenue and cuts costs, there can be no guarantee that the company will have sufficient financing commitments to meet funding requirements for the next 12 months without raising additional capital. There can be no guarantee that it will be able to raise such additional capital."

Facing a similar predicament in April, the firm secured $15m in funding from hedge fund Standard General. However, it is unclear how the American Apparel will raise the cash for October's payment.

A bid to create more shares in the company to raise the cash was rejected by shareholders earlier this month.

The firm has been dogged by a series of controversies recently.

Former chief executive Dov Charney, who was dismissed for alleged sexual harassment, has launched a costly legal battle against the firm and American Apparel's advertising strategy, involving young female models in provocative commercials, has also come in for criticism.

As part of a drive to cut costs, the company has started to close down its UK store base of around 15.