American Apparel Inc. won some breathing room from its lender, Lion Capital, but will have to ramp up profitability to keep within the terms of its new deal.
Lion also gave the company’s controversial chief executive officer, Dov Charney, a vote of confidence, but said it would be bringing in some new senior executives.
“Lion Capital has enormous admiration for both American Apparel and its founder, Dov Charney,” said Lyndon Lea, founder and partner of Lion. “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.”
Lion also voiced support for the company’s “Made in USA” philosophy and its 7,000 Los Angeles workers.
Reached by phone, Charney said the amendment showed Lion’s willingness to work with American Apparel as it strives to improve operating results.
“Retail is hard right now,” he said. “I’m not alone in this. You have to work for every dollar, you have to work on the merchandise, make sure the product mix is perfect and the allocation is right. It’s a tough market right now.”
Charney noted American Apparel is focused on improving business in its existing store base. The company does continue to open stores sporadically as opportunities arise. A new unit opened in Paris two weeks ago and another store is slated to open in St. John’s, Newfoundland, next week, Charney said. The company employs 10,000 people and operates more than 280 stores in 20 countries.
Asked about the hiring of new senior-level executives to help lead a turnaround at the company, Charney demurred on any details. “If we hire a new C-level executive, I will let you know,” he said.
American Apparel is working with a number of consulting firms in its efforts to improve operations, including West Palm Beach, Fla.-based FTI Consulting, PriceWaterhouseCoopers and Deloitte & Touche, which continues to work with the company in Canada despite having resigned as its corporate independent auditor.
“We work with consulting firms all the time on a project basis,” said Charney.
The loan deal eliminates a condition that the company keep earnings before interest, taxes, depreciation and amortization above a certain level through the end of this year. In August, American Apparel warned it would likely break the covenant and that its ability to continue as a going concern was in doubt.
Although many questions remain, investors greeted the news of a new deal on Friday with a hearty rally, pushing the stock up 16.3 percent to close at $1.43. Over the past year, the stock has traded as high as $3.88 and as low as 66 cents. At its height in December 2007, the issue traded at more than $15 a share.
To meet the terms of its tweaked loan agreement, American Apparel now has to register consolidated EBITDA of $20 million for the 12 months ending Jan. 31. The threshold rises over time and by September 2013, the company will need to pull in EBITDA of $80 million to remain in compliance.
American Apparel’s EBITDA was $45.9 million for the 12 months ended March 31, but the business weakened over the spring. Preliminary results for the second quarter, ended June 30, revealed a 16 percent comparable-store sales decline, on a constant currency basis, and operating losses of $5 million to $7 million.
A dark cloud still hangs over the American Apparel books, and the NYSE Amex LLC gave the company until Nov. 15 to file its official second-quarter results and avoid being delisted from the exchange.
Deloitte & Touche resigned as the retailer’s auditor in July and indicated it had “certain information” that could impact the reliability of the firm’s 2009 financial statements. The U.S. Attorney’s office in Manhattan subpoenaed documents related to the auditor shuffle.
“Azzedine has been one of the biggest influences in my life. He has always been such a strong, loving, fatherly figure to me. I call him Papa. His designs are indescribably unique, they are pieces of art. He knew how to make the female form look its loveliest. I have so many memories of him; my favorite might be during my first show with him in Paris. He liked me and he wanted to help me get more work. He called all his friends at Kenzo and Comme des Garcons, and asked them to book me. They said, ‘But she can’t walk!’ And he said, ‘but she has such a great ass!' His friendship and support has been the great privilege of my career. I can't imagine life without him. Repose en paix mon Papa.” - @stephanieseymour tells @wwd. #wwdfashion (📷: @steveeichner) #alaia #azzedinealaia
Azzedine Alaïa, flanked by two of his closest friends, models Stephanie Seymour and Naomi Campbell.
He designed Seymour’s dress for her 1995 wedding to Peter Brant, and treated Campbell (who famously called him Papa), like a daughter. For more on the legendary designer, tap the link in bio. #wwdfashion #alaia #azzedinealaia
Azzedine Alaïa's “I-did-it-my-way” ethos stood out starkly at a time when brands are experimenting with consumer-facing fashion shows, coed formats and trans-seasonal collections – anything to perk up lackluster sales of ready-to-wear in an age of Insta-everything. “It’s not creation anymore. This becomes a purely industrial approach,” the late designer told WWD in an interview last year. “But anyway, the rhythm of collections is so stupid. It’s unsustainable. There are too many collections.” Read more about the iconic designer’s life and work on wwd.com, link in bio. #wwdfashion #azzedinealaia (📷: @WWD Archive, 1986) #alaia
Sneaker reselling app @goat’s latest exhibit, "The Greatest: New York," tells the story of New York's sneaker culture. To celebrate the exhibit, an intimate crowd gathered on Thursday night at the pop-up gallery space, located at Platform in Culver City, to hear guest speaker and illustrator @esymai talk about her own rise in streetwear and women in the business. "For me I'm just someone who is creative. I like to create things," said Chang. #wwdfashion
Azzedine Alaïa, one of the most iconic couturiers of the modern era whose body-con designs defined Eighties fashion, has died in Paris. The diminutive Tunisian-born designer, known for his structured knitted dresses with fitted waists and impeccably cut, figure-hugging second skin silhouettes was deeply admired by his peers, and counted supermodel Naomi Campbell - his adoptive daughter - among his inner circle, one of a gang of glamazons including Farida Khelfa, Carla Bruni and Stephanie Seymour who became ambassadors of his style. (📷: Alexandre Guirkinger) #wwdblast