Next Level Apparel challenges Gildan's bid for bankrupt American Apparel, says source

California-based apparel maker Next Level Apparel has submitted an offer to challenge a $66 million bid from Canadian apparel manufacturer Gildan Activewear Inc for bankrupt American Apparel LLC, a person familiar with the matter said Monday.

There were also partial bids submitted for the teen retailer, including from liquidators for its retail inventory, the person said. American Apparel plans to ask a judge for approval on Jan. 12.

A U.S. bankruptcy court judge will have to approve the winning bid.

American Apparel, in its second bankruptcy, is being sold in an auction that began Monday morning in New York. The auction for the retailer, famous for its sexually-charged advertising, attracted interest from e-commerce giant Amazon.com Inc, competitor Forever 21 Inc and brand licensor Authentic Brands Group LLC, which led a consortium to acquire Aeropostale Inc out of its bankruptcy last year.

American Apparel's struggles show the major challenges facing brick-and-mortar retailers as more consumers shop online.

It could not be determined whether any other bids submitted for American Apparel were qualified to challenge Gildan, which also makes Goldtoe socks and Anvil clothing. Gildan plans to take some of American Apparel's manufacturing plants in southern California, one of the largest garment-making operations in the U.S. with about 3,500 employees.

The bulk of Gildan's manufacturing takes place overseas in the Caribbean and Central America.

Privately held Next Level Apparel makes its garments in China, Mexico and Central America, according to the company.

Next Level's bid was deemed as qualified by American Apparel to be able to challenge Gildan, the person said.

The source asked not to be identified because details of the bankruptcy auction are confidential.

American Apparel and Gildan declined to comment. A request for comment from Next Level was not immediately returned.

American Apparel filed its second Chapter 11 in November with about $177 million in debt after a turnaround plan implemented by its owners, a group of former bondholders, failed. The company filed its first Chapter 11 in October 2015, and emerged early last year.