downward spirals

American Apparel’s Latest Financial Mess

In March of last year, American Apparel narrowly escaped a bankruptcy filing by securing an $80 million loan from Lion Capital to help meet a deadline on paying down another $51 million loan. Paying a loan with a loan would seem less than ideal, and turns out it probably was. Yesterday, American Apparel’s shares tumbled 42 percent after the company revealed it didn’t expect to fully meet its obligations as debtors to Lion. American Apparel is working with Lion to come up with an amendment so they are not in violation of the original agreement, but the uncertainty has caused the company to delay filing their results for the first quarter, ended March 31. The stock exchange doesn’t like that, and has threatened to delist the company. Additionally, American Apparel announced they won’t make financial predictions for the rest of the year, three more quarters, because of “highly uncertain sales trends” and the sticky situation with Lion Capital.

On March 31, American Apparel’s debt totaled $91.4 million, while it had $36 million available in its U.S. credit facility and $4 million available in its Canadian credit facility. The company is now uncertain about its operating plan for this year. Lion Capital expects to work something out with American Apparel, but perhaps at the cost of its stock.

American Apparel says it is still reviewing and finalizing the numbers so it can file them. However, same-store sales look to be down about 3 percent in the U.S., 15 percent in Canada, and 16 percent abroad. The company is struggling to replenish its factory staff after being forced to lay off 1,500 in September, which hasn’t been great for its numbers. But this is a company that consistently crawls out of its messes, or at least distracts from the last with a new one.

American Apparel shares sink [Reuters]
American Apparel Facing New Credit Crisis [WWD]

American Apparel’s Latest Financial Mess