American Apparel Confirms $80 Million Financing Deal
Los Angeles–based vertical manufacturer/retailer American Apparel announced a private financing agreement with London-based Lion Capital LLP for $80 million.The timing of the deal with Lion, a private equity firm that once owned the iconic Jimmy Choo shoe brand, is fortuitous for American Apparel. The company owes SOF Investments more than $50 million and faced stiff penalties if it failed to meet upcoming payment deadlines later this month.
A statement from American Apparel said proceeds from Lion’s investment will be used to “retire in full” the outstanding debt to SOF and will dedicate the remaining proceeds to “reduce the outstanding balance under the company’s revolving credit facility, repay a portion of a shareholder note, pay fees and expenses related to the transaction, and for working capital purposes.”
Dov Charney, American Apparel’s founder and chief executive, said he thinks Lion’s investment represents a strong endorsement of the company and its potential. “This investment provides us with a long-term solution for our capital structure and an enhanced ability to grow our brand both domestically and internationally over the coming years,” he said in a statement.
Under the terms of the deal, Lion receives warrants for 16 million shares of American Apparel’s common stock at a value of $2 per share. The warrants expire in March 2016 and would represent approximately 18 percent ownership of American Apparel. Additionally, two Lion executives—Neil Richardson and Jacob Capps—intend to join the company’s board of directors.
The news was well-received on Wall Street, sending American Apparel’s stock up more than 53 percent from a $1.49 close on Thursday to $2.29 at press time. The rally is good news for the company, which saw its stock drop from a high of $10.86 per share in the last year. Retail sales, always one of American Apparel’s strong suits, also took a hit recently. In February, the company announced a drop of 9 percent at its stores—a first for American Apparel. —Erin Barajas
