American Apparel Replaces Senior Credit Facility
Los Angeles–based vertical manufacturer and retailer American Apparel Inc. replaced anexisting $75 million senior credit facility that was set to expire in July with a three-year, $80 million senior credit facility with Crystal Financial LLC as administrative agent and Salus Capital Partners LLC as documentation agent.
The credit facility with Crystal Financial and Salus Capital includes a $30 million term loan with the balance in revolving credit. The credit facility matures in 2015. The company also amended and extended the maturity of its second lien credit facility with Lion Capital LLP and affiliates by two years to 2015. The company also negotiated an easing of the minimum EBITDA financial covenant of the second lien loan and agreed to pay a minimum of 5 percent of each interest payment accrued after Sept. 1 on the outstanding principal in cash.
John Luttrell, chief financial officer of American Apparel, said the credit facility helps the company achieve its goal of replacing “our existing senior credit facility with a long-term facility at commercially appropriate rates with additional capacity.” He added that “our estimated cash flows fully support the added interest payments when compared to our prior senior secured facility.”
According to an American Apparel statement, the two actions will “provide the company with additional borrowing capacity and financial flexibility as it continues to build upon recent positive momentum in its business.”
“These financial agreements, coupled with improved financial performance, will provide added flexibility in delivering upon our operating plan for 2012 and beyond,” said Dov Charney, chairman and chief executive officer of American Apparel. Similarly, the extension of the credit facility with Lion Capital gives the company added flexibility without diluting the company’s equity shareholders, he said.
“With the actions taken today, we have a clear path for the next three years to concentrate on our business and deliver solid operating-performance improvements,” Luttrell said.
Most important, we have concluded that there is no longer substantial doubt about our ability to continue to operate as a going concern.” American Apparel employs approximately 10,000 people and operates 250 retail stores in 20 countries.—Alison A. Nieder
