American Apparel Inc.’s shares fell 32 percent Thursday after reports said it has hired Skadden, Arps, Slate, Meagher & Flom to advise it on restructuring options.
Credit professionals are saying that the controversial specialty chain has been having a hard time complying with financial covenants in its loan agreements. Meanwhile, those who trade debt have begun speculating whether a restructuring of the chain’s financial structure could include a bankruptcy filing down the road.
Since the end of January, shares of American Apparel have been struggling to stay above the $1 per share range. On Thursday shares closed at 66 cents.
The Wall Street Journal reported Thursday that the chain hired lawyers from Skadden, Arps regarding restructuring options.
John J. Luttrell, the retailer’s chief financial officer, could not be reached for comment by press time.
In November, ratings agency Moody’s Investors Service lowered American Apparel’s credit rating a single notch to “Caa2” from “Caa1,” after the Los Angeles-based firm fell out of compliance with covenants of its credit facility with Capital One. Moody’s has the rating outlook at negative.
American Apparel has said its issues stem from difficulties making the transition to a new distribution center. And the retailer has also said it didn’t expect to be in compliance with its Capital One facility until the third quarter of 2014.
The firm’s net loss in the third quarter was narrowed to $1.5 million from $19 million, while sales inched up 1.5 percent to $164.5 million.
The weakness at the vertical chain doesn’t seem to be abating. Its January comparable-store sales declined 5 percent, a sequential decrease from December’s comp drop of 6 percent.
American Apparel is scheduled to report fourth-quarter results in mid-March.
From overseeing America’s fastest-growing speciality retailers to codifying cool, WWD talked to the women who are leading the way for the future of beauty. Check out our Instagram Stories to see how these women built today and are creating tomorrow. (📸: @hannah_khymych) #wwdbeauty
For @laperlalingerie's spring 2018 show, the brand chose to host their event at @thevenetianmacao. With Chinese megastars @bingbing_fan and @hubing in attendance, La Perla debuted a rock ‘n’ roll-inspired collection. The show marked the start of Sands Macao Fashion Week, which runs from October 19 to 24 — the city’s first such event. Pictured here are models backstage with glimmering eyes. #wwdfashion (📷: Cheuk-Yin To)
Trending for spring 2018: top stitch design. Gone are the days of stitch just for seams — designers are using the once-minimal detail to create strong decorative elements. (📷: Paola Testa; Styled by @andrew_shang) #wwdfashion
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)