American Apparel Announces Changes in Credit Agreement, Executive Management
American Apparel, the Los Angeles–based vertically-integrated retailer announced an amendment to its credit agreement with a key lender, London-based Lion Capital, which will help it avoid a breach of covenant.The reworked credit deal, which eliminates a requirement that American Apparel earn a minimum operating income in 2010 as measured by its consolidated earnings before interest, taxes, depreciation and amortization (EBITDA). The deal, however does stipulate that American Apparel must meet a minimum consolidated EBITDA covenant on a monthly basis in 2011.
Lion’s influence at the company is set to grow. The investor announced that it will work with Dov Charney, the company’s founder and chief executive, to hire several new senior executives to help manage the company.
“Lion Capital has enormous admiration for both American Apparel and its founder, Dov Charney,” said Lyndon Lea, founder and partner of Lion Capital, in a statement. “We are working together with Dov to realign the capital structure of American Apparel to support a number of key initiatives within the business, including the hiring of several new senior executives...We are particularly impressed by Dov’s passion and energy, and have complete confidence in the American Apparel brand and its business model as an integrated manufacturer and retailer.”
The stock market responded favorably to the news. American Apparel’s stock jumped 16 percent on Oct. 1 to $1.43 per share.—Erin Barajas
