American Apparel filed for bankruptcy protection earlier today, a result of a series of bad events, including stiff competition, declining sales and workplace scandals.

The made-in-America retailer has lost $340M over the past five years with $45M of that coming this year. Shortly before filing, the retailer struck a deal with creditors to reduce its $311M debt through debt-for-equity conversion.

The deal also includes extra financing of $200M from participating bondholders so that its 130 stores and manufacturing operations can stay open.

The bankruptcy will pause the lawsuits but also wipe out American Apparel's current shareholders, including Dov Charney, the ousted founder, whose stake is worth about $8.2M. Instead, the company's creditors, like hedge fund Standard General will be in full control.

In fact, with the crippling debt and interest payments out of the way, American Apparel could make a successful turnaround, CEO Paula Schneider says. [NYT]