Retailers, consumers and prices
Check out the expected financial lifeline at American Apparel.
Sources expect the company, known for its colorful T-shirts, spandex leggings and other edgy, “Made-in-USA” retro appeal, and its main backer, British-based private equity firm Lion Capital, to reach an agreement that will prevent American Apparel from a looming debt covenant breach.
Last month, American Apparel lost nearly half its value after announcing it might trip a second-quarter covenant on June 30.
American Apparel and Lion Capital did not comment.
The threat of default comes on the heels of an immigration probe and mass layoffs that led to a wide quarterly operating loss, shrinking margins and “highly uncertain” sales at American Apparel. That in turn has cast a shadow over founder and CEO Dov Charney’s long-term hold on his brainchild — a bastion of anti-establishment cool that advocates immigrant rights, sexual permissiveness and the power of a well-fitting, poly-cotton T-shirt.
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Check out the Lion’s share of American Apparel.
OK, so it’s not getting majority ownership. Still, American Apparel, known for bright tees and sultry advertising, said Lion Capital LLP invested $80 million.
“In light of unprecedented market conditions, we believe Lion Capital‘s investment serves as a strong endorsement of our company and the tremendous potential of our brand,” said American Apparel founder and CEO Dov Charney.
American Apparel shares, which trade on the AMEX, shot up almost 33 percent to $1.98 in morning trading.
Lion Capital, based in London, gets to bring two people onto the board. It also gets warrants for shares, that if converted into common stock, would give the firm about an 18 percent stake in the clothing retailer.