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.
@chanel and @pharrell dropped what’s being dubbed as the world’s most exclusive sneakers yesterday. The Adidas Originals NMD Hu, which Williams designed in collaboration with Chanel and @adidasoriginals, has a waiting list of over 120K people who pre-registered online at chanelatcolette.fr –– and only 500 pairs are on sale. The singer predicted the resale value of the shoes could reach $40K. Read the full interview on WWD.com. Link in bio. #wwdfashion
@imanshumpert is diving deeper into his creative endeavors and relaunching his clothing line, Post 90s, and is helping to raise money for the hurricane victims in St. Maarten with a jersey he’s designed with his brother. The Cleveland Cavaliers player talked to WWD about kneeling during the national anthem, working with fashion brands and how he wants to be more than an @nba player. Read the interview on WWD.com #wwdfashion (📷: George Chinese)
Not only does #TheProfit return to CNBC tonight, but @marcuslemonis has launched @shopmarcus, a new shopping and lifestyle retail experience in Aspen and Chicago, with more locations to come. The retail stores offer in-store stylists and a variety of contemporary womenswear selections.
“It’s life, I’m going to face it,” @mingxi11 sighed. “I fell, but you know, I think the most important thing is that I get back up. I had the love, the help from my sister — the girl next to me Gizele [Oliveira] — she’s so nice. When I went backstage everybody was trying to comfort me like ‘Oh Ming, it’s OK.’ I’m really, really touched. I think it’s them who gave me the courage to go back on stage for the finale,” Xi told WWD of her fall at the @victoriassecret fashion show. (📷: David Fisher) #wwdfashion #vsfashionshow #victoriassecret
@louisvuitton tapped @therealpeterlindbergh for its latest city-centric photo book, which is part of a series called Fashion Eye. The primarily black and white book captures the spirit of Berlin in 57 images shot between 1989 and 2019. “Berlin is an inspiration for me, more than a city. I mean @millajovovich is simply Berlin!” said Lindbergh. #wwdfashion
“You know, I think audiences expect a certain performance so I have to deliver to them what they’re expecting to a certain degree. But I’m also a different actor and a different person, I have my own spin on the character,” says @noahegalvin of his takeover of the leading role in “Dear Evan Hansen” following the departure of @bensplatt, who originated the role. Read WWD’s interview with the 23-year-old actor on WWD.com #wwdeye (📷: @jilliansollazzo)
For pre-fall 2018, @etro created richly-colored wonderland, using tapestries, textiles and wallpapers from the Eastern world at large. The line featured floral and graphic prints and jacquard motifs, like this two-piece look featured here. #wwdfashion (📷: Giovanna Pavesi)
@kith is moving into children’s. The men’s and women’s streetwear brand has launched Kidset, a Kith kids line located in New York at 64 Bleecker Street. The line includes mini versions of staple Kith pieces like the Astor bomber jacket and the Kith box logo sweatshirts, along with a wall that can display up to 120 pairs of shoes from @adidas, @newbalance, @timberland and more. #wwdfashion
“I just wanted to create this fully rounded character, but I do think what excited me most was just the opportunity to give a group of people representation that I feel needs it. I like to do characters in projects that stand for something and Karolina definitely does, so that was really exciting to me,” @ginnygardner says of her new role in @hulu’s “The Runaways.” Gardner plays Karolina Dean, a queer superhero, which is a rarity for @marvel. Read more about Gardner’s character on WWD.com #wwdeye (📷: @dandoperalski)