LOS ANGELES, Calif. – American Apparel Inc., which has been struggling with losses that had raised concerns about its ability to stay in business, has secured two credit deals extending into 2015 that the clothing maker says give it more financial flexibility.
The company announced late Tuesday that it has replaced a $75 million senior credit facility due to expire in July with an $80 million facility expiring in March 2015 with Crystal Financial, a firm backed by hedge fund financier and philanthropist George Soros.
The Los Angeles company also said that it is extending the maturity of its second lien loan with Lion Capital LLP and affiliates by two years to Dec. 31, 2015.
“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,” American Apparel Chief Financial Officer John Luttrell said in a statement Tuesday.
He added that “there is no longer substantial doubt about our ability to continue to operate as a going concern.”
American Apparel has struggled in recent years. It has made management changes – including hiring an executive from Urban Outfitters as a new chief merchandising manager – and closed stores in the past year in an effort to improve results. The company hasn’t reported a quarterly profit since the last quarter of 2009.
The clothing maker’s stock had gained 36 per cent over the past two days, apparently triggered by a New York Post report Monday that it was near a deal on the new credit line with Crystal.
“American Apparel has made great strides over the past year in improving its overall financial performance and we are pleased to be in a position to provide them with the financial flexibility needed to continue to build upon that momentum,” Crystal Financial Managing Director Stephen Krawchuk said in a statement on Tuesday.
Its shares finished at $1.02 on Tuesday ahead of the announcement on the lending deals. Its shares traded as low as 52 cents per share in mid-December. They peaked for the past year at $1.69 per share in late April.
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