LOS ANGELES—Financially beleaguered clothing retailer and manufacturer American Apparel filed for Chapter 11 protection at US Bankruptcy Court in Delaware on Monday, following five years of losses. The company said in a statement Monday that the reorganization would reduce its debt load from $300 million to no more than $135 million, thus lowering annual interest expenses, and that its secured lenders had provided enough capital to fund continuing operations.

In court documents, American Apparel lists assets of $199.3 million and liabilities of $397.6 million. Ninety-five percent of American Apparel's secured lenders have signed onto the company's restructuring support agreement, which will exchange more than $200 million worth of bonds for equity interests in the reorganized company.

CEO Paula Schneider, who took over this past January after the comopany's board terminated founder Dov Charney, says the reorganization will ultimately benefit American Apparel's employees, suppliers and partners. “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,” she says.

The bankruptcy filing does not affect American Apparel's international operations, and the company says domestic retail, wholesale and manufacturing operations will continue without interruption. As of Sept. 30, the company operated 227 stores in 19 countries including the US and Canada. That's down from 249 stores six months earlier, according to a Bloomberg Business report.

Bloomberg's report also quoted Craig Johnson, president of consulting firm Customer Growth Partners, as observing that the retailer has lost customers to expanding chains such as Forever 21, H&M and Uniqlo that target the same demographic. Sales declined 17.2% year-over-year to $134.4 million in the quarter that ended June 30, American Apparel reported in August.

American Apparel's legal advisor in connection with the restructuring is Jones Day, while FTI Consulting serves as its restructuring advisor and Moelis & Co. is serving as its investment banker for the restructuring. The company expects the reorganization to be completed in about six months.