By  on May 19, 2010

American Apparel Inc.’s white knight may turn out to be an albatross.

Shares of the Los Angeles-based retailer fell more than 40 percent Wednesday after it said it does not expect to be in compliance with a covenant covering debt to adjusted earnings before interest, taxes, depreciation and amortization under a credit agreement with Lion Capital as of June 30. The firm based the projection on “existing trends” and results for the first quarter ended March 31.

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