On January 31, 2011, American Apparel Inc entered into a waiver (the “Credit Agreement Waiver”) to its Credit Agreement, dated as of March 13, 2009 (as previously amended or otherwise modified, the “Lion Credit Agreement”), among the Company, in its capacity as borrower, certain subsidiaries of the Company, in their capacity as facility guarantors, Wilmington Trust FSB, in its capacity as administrative agent and collateral agent, Lion Capital (Americas) Inc., as a lender, Lion/Hollywood L.L.C., as a lender, and other lenders from time to time party thereto.
The Credit Agreement Waiver waives, for the period from January 31, 2011 to but excluding February 11, 2011, the Company's obligation to maintain a minimum Consolidated EBITDA for the twelve consecutive fiscal month period ending January 31, 2011.
The Company is discussing possible amendments to the Lion Credit Agreement to address its compliance with the Specified Covenant for future trailing twelve-month periods, as well as making the Credit Agreement Waiver permanent beyond February 11, 2011. However, the Company can provide no assurance that it will be able to secure such amendments or extension nor, if secured, the terms thereof.
Under the terms of its revolving credit agreement with other lenders and Bank of America, N.A., as administrative agent (the “BofA Credit Agreement”), noncompliance with financial covenants (including the Specified Covenant) under the Lion Credit Agreement constitutes an event of default under the BofA Credit Agreement.
An event of default under the BofA Credit Agreement which is not waived would block the Company from making borrowings under its revolving credit facility, in which case the Company would have to obtain additional liquidity. An event of default under the Lion Credit Agreement and/or the BofA Credit Agreement could result in all indebtedness thereunder being declared immediately due and payable, in which case the Company would have to obtain additional sources of liquidity.
There can be no assurance that the Company would be able to obtain additional sources of liquidity on terms acceptable to the Company, or at all, or that our assets would be sufficient to repay in full our obligations under our debt instruments. The acceleration of any or all amounts due under the Lion Credit Agreement or the BofA Credit Agreement or the loss of the ability to borrow under the BofA Credit Agreement would have a material adverse impact on the Company's operations which would result in the need for the Company to modify its current business plan and/or curtail its operations and could affect the Company's ability to continue operations as a going concern.
20240830145952.gif)
.jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "UBM China (Shanghai)")
-Ltd..jpg?tr=w-120,h-60,c-at_max,cm-pad_resize,bg-ffffff "Thermore (Far East) Ltd.")
