American Apparel is slated to complete an overhaul of its credit financing this week via a private offering of $206 million in senior secured notes. The proceeds from the offering, which carry an interest rate of 13 percent and come due in 2020, will be used by the specialty retailer to repay and exit its credit facilities with London-based Lion Capital and Boston-based Crystal Financial.
Additionally, American Apparel has secured a new asset-backed revolving credit facility of about $30 million with an unnamed bank.
American Apparel sales are on an upswing. Same-store sales advanced 13 percent for the full year 2012 while its online sales increased 30 percent. Total sales increased 12.8 percent to $617.3 million, but the company posted a net loss of $37.3 million, or 35 cents a diluted share. In 2011 the company lost $39.3 million, or 42 cents. RELATED STORY: Dov Charney's Pay at American Apparel Rises >>
The new notes are issued at 97 percent of par value, which means American Apparel will receive $199.8 million from the offering’s underwriter, which in turn sells the notes to institutional investors. The offering is expected to close on April 4, concurrent with the closing of the asset-backed revolving credit agreement.
Dov Charney, chief executive officer of American Apparel, declined to comment on the refinancing prior to its closing.
The 13 percent interest rate the company is paying is relatively high for a bond, but it allows it to pay off the existing Lion Capital note, which carried an exorbitant 18 percent interest rate. As of Dec. 31, American Apparel owed $137.6 million to Lion Capital, a sum that had ballooned from $80 million in 2009. The approximately $56 million owed to Crystal Financial carried a lower interest rate of about 9.5 percent.
While the Lion Capital financing was onerous, it provided American Apparel with crucial credit at a time the company faced a potential bankruptcy. Lion Capital gained two seats on the American Apparel board in 2009 but gave those up in 2011. The British private equity firm, headed by Lyndon Lea, still holds warrants for about 16 million American Apparel shares, which it could profitably exercise at any point — and Charney and Lea remain on friendly terms. American Apparel shares closed down three cents at $2.17 on Thursday, the last day they were open. The stock has risen from a low of 75 cents a little less than a year ago.
The new bond financing leaves American Apparel with some additional capital to invest in stores and infrastructure. The company plans to expand its retail store base by 60 to 70 units over the next three to five years, up from its current count of 251. E-commerce as a total percentage of sales is forecast to grow to at least 17 percent of its non-wholesale revenue, up from 12.4 percent in 2012.
Standard & Poor’s assigned a “B-” rating to both the new note offering and American Apparel’s overall corporate credit rating. The agency said the company’s outlook is “stable” and that it expects American Apparel’s credit measures to improve modestly, benefitting from increased profitability due to lower raw material costs, a new distribution center and other operating efficiencies.
The bonds have a credit recovery rating of “4,” which indicates an average recovery rate of 30 to 50 percent in the event of a payment default.
“We expect [American Apparel’s] credit protection measures to improve modestly but remain weak for the next one to two years,” said Standard & Poor’s credit analyst Linda Phelps.
Exclusive: Nicola Formichetti is parting ways with @diesel after nearly four years. Formichetti, who served as Lady Gaga’s stylist in 2009, joined Diesel in 2013 as creative and artistic director. His first show debuted in Venice with a show held at the Venetian Arsenal. #wwdfashion #wwdnews
The polo shirt - an icon of preppy style - is roaring back into fashion in many creative guises, like this A-line polyester top from @carven, worn with @31philliplim cotton and elastane pants. Designers stretched a fashion classic into all kinds of new permutations this season. See how @mayteallende styled the preppy trend on WWD.com #wwdfashion (📸 : Kinya)
(Market Editors: @andrew_shang and @elmercer, Makeup: @amandawilsonmakeup using @fentybeauty, Hair: @gonn24, Model: @bara_holotova at @women360mgmt)
“I do like period [projects] a lot because I like creating those worlds, a world that is different from today," costume designer Mark Bridges said about the '50s British couture featured in @phantomthread. Bridges created the overall aesthetic and individual fashion looks for the film, which stars Daniel Day-Lewis, Lesley Manville and Vicky Krieps. Pictured here is a gown he designed for Krieps who plays Alma – the love interest of Day-Lewis' character, Reynolds Woodcock. #wwdfashion
@prada is embracing the holiday season with a series of short movies about the art of gift-giving. "The Postman's Gifts", which was directed by American filmmaker Autumn de Wilde, focuses on the brand's signature Prada Galleria bag and features Elijah Wood as the postman. In the first two episodes, Wood's delivers the iconic bag to @emmaroberts, who plays herself as a movie star, and Sasha Frolova. #wwdfashion
“I think I never met the person while we were working,” Vicky Krieps said of Daniel Day-Lewis, who she plays the love interest of in “Phantom Thread.” Day-Lewis remained perennially in character, so much so that she feels she’s just meeting him now. “It’s interesting to see how different he is in real life to the character,” Krieps said. WWD sat down with the 34-year-old actress to talk about her new role in the period film, which brings the fifties’ gender dynamics into the mix. Read more on WWD.com. #wwdeye (📷: @lexieblacklock)
@gucci has expanded its “Places” project to include six new cities. The initiative, which was first unveiled in July, aims to invite people to explore inspirational locations for the brand. On the list is the Biblioteca Angelica library in Rome pictured here. See the other five new venues on WWD.com. #wwdfashion (📷: @massimo_listri_official)
#ad From tools to lashes, WWD rounded up wellness and beauty products guaranteed to take your skin care and makeup routines to the next level in 2018. Follow along as @laceandleatherbyelyse, @ashnfashn and @elleisalwayshere experiment with these products on their Instagram profiles and blogs. #NewYearBetterYou
Blogger @camilacoelho is one of the fastest growing beauty influencers around the world. The bilingual blogger has worked with brands like @revolve Beauty, @dior, @louisvuitton and more and has an Earned Media Value of $34,338,441, according to @tribedynamics. But Coelho isn’t the only influencer making a major impact — head to WWD.com to see the other fastest-growing influencers in six key global markets. #beautyfridays (📷: @zefashioninsider)