• Linkdin
Maximize your media exposure with Fibre2Fashion's single PR package  |   Know More

American Apparel secures $14.9 mn in new financing

27 Apr '11
3 min read

American Apparel Inc, a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel, announced it has raised $14.9 million in new capital, which will allow it to take advantage of improving business conditions, while at the same time meeting increased bank required reserves.

The company has agreed to sell approximately 15.8 million shares of common stock at $0.90 a share to a group of private investors led by Canadian financier Michael Serruya and Delavaco Capital. The investors also received the right to purchase up to an additional approximately 27.4 million shares at the same price within 180 days, subject to certain anti-dilution and other adjustments. In addition, American Apparel chairman and CEO Dov Charney would purchase up to an initial approximately 0.8 million shares at $0.90 a share, with a similar right to purchase up to an additional approximately 1.6 million shares.

"We deeply appreciate this vote of confidence from Michael Serruya and his colleagues," said Mr. Charney. "We are also grateful for the support we've received from our lenders."
"We believe in the American Apparel brand and we believe in Dov Charney," Mr. Serruya said. "We are convinced that with adequate resources, Dov and his experienced management team will lead American Apparel to new heights."

As a condition to the investors entering into the financing agreements, the investors required that the company provide Mr. Charney a right to receive up to three installments of additional shares of common stock beginning in 2013 as anti-dilution protection if certain stock price performance benchmarks ranging from $3.25 to $5.25 per share are achieved. In the event these benchmarks are achieved in full, the company would be required to issue an additional approximately 39.7 million shares to Mr. Charney.

The issuance of shares under the new financing agreements also will require the issuance of additional warrants to Lion Capital and will reduce the exercise price of Lion's existing warrants under the anti-dilution provisions of their credit agreement and adjustments to the company's warrant with SOF Investments.

Among other things, the new capital should allow the company to execute its business plan while meeting the new increased minimum excess availability requirement of its first-lien lender, as described below.

The company is also in discussions with its lenders regarding amendments to its credit agreements with Bank of America and Lion Capital. Among other things, the Bank of America amendment is expected to increase the minimum excess availability requirement to $12.5 million from $7.5 million, and the Lion amendment also is expected to expand Lion's anti-dilution protections with respect to its warrants. The amendments also are expected to waive the requirement that the year-end audit for fiscal year 2010 be provided without a "going concern" or similar qualification.

The issuance of shares pursuant to the purchase rights in the financing agreements and Mr. Charney's anti-dilution provision is subject to approval of the company's stockholders at the company's next annual meeting of stockholders, currently scheduled for June.

The company will be filing with the Securities and Exchange Commission a Current Report on Form 8-K with additional information about the financing transactions and the credit agreement amendments.

American Apparel Inc

Leave your Comments

Esteemed Clients

TÜYAP IHTISAS FUARLARI A.S.
Tradewind International Servicing
Thermore (Far East) Ltd.
The LYCRA Company Singapore  Pte. Ltd
Thai Trade Center
Thai Acrylic Fibre Company Limited
TEXVALLEY MARKET LIMITED
TESTEX AG, Swiss Textile Testing Institute
Telangana State Industrial Infrastructure Corporation Limited (TSllC Ltd)
Taiwan Textile Federation (TTF)
SUZHOU TUE HI-TECH NONWOVEN MACHINERY CO.,LTD
Stahl Holdings B.V.,
Advanced Search