American Apparel Inc. doesn’t believe it will hit a required covenant under a credit agreement between the company and Lion Capital, which will mean that the Lion warrants to purchase American Apparel’s common stock at the exercise price of $1 per share will need to be adjusted.
According to the definitive proxy filed Monday with the Securities and Exchange Commission, American Apparel said it was still finalizing its financial statements for the first quarter ended March 31, but that information as of the filing of the proxy has the company believing it “will not achieve” the level required, which means that per an earlier agreement between American Apparel and Lion, the exercise price for each warrant will be reduced by 25 cents a share. The covenant has a defined ratio unique to the credit agreement and is for the trailing 12 month period ended March 31, according to the proxy.
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