Moving on a pledge to its lender to bring in new executive talent, American Apparel Inc. Friday named former Blockbuster executive Tom Casey as acting president of the firm.
Casey reports to Dov Charney, chairman, chief executive officer and founder of American Apparel, who was also president prior to Casey’s appointment. Casey will be primarily responsible for developing the operating strategy of the Los Angeles-based firm.
This month, Lion Capital amended terms of American Apparel’s loan agreement to prevent the retailer from falling out of compliance with the pact. Lyndon Lea, Lion’s founder and partner, said his firm was working with Charney “to realign the capital structure of American Apparel to support a number of key initiatives within the business, including the hiring of several new senior executives.”
American Apparel shares rose 12 cents, or 10.3 percent, to $1.28 in Friday trading.
Casey, with more than 24 years experience in financial management and strategic planning, spent three years at Blockbuster Inc. as executive vice president and chief financial officer before departing in August. The firm filed for Chapter 11 bankruptcy protection last month.
Before joining Blockbuster, Casey was managing director at Deutsche Bank Securities and held investment banking positions at Citigroup and Merrill Lynch. He was appointed to the board of The Great Atlantic & Pacific Tea Co. on Sept. 21.
According to a Securities and Exchange Commission filing by American Apparel, Casey’s employment agreement is for an initial 15-month term beginning Oct. 1, which will automatically extend for successive one-year periods beginning Jan. 1, 2012. He will receive a minimum base salary of $400,000 and will also be entitled to a 2010 bonus of $75,000.
The retailer said in August it was in danger of flipping a financial covenant in its loan agreement with Lion, triggering a number of debt repayments and putting its ability to continue as a going concern at risk. The amended version agreed upon this month eliminates a condition that the company keep earnings before interest, taxes, depreciation and amortization above a certain level through the end of this year. To meet the revised terms, American Apparel will need consolidated EBITDA of $20 million for the 12 months ending Jan 31. That threshold gradually rises, requiring EBITDA of $80 million by September 2013.
American Apparel operates more than 280 stores in 20 countries. During Casey’s tenure with Blockbuster, the company in January shrank its store count to 3,200 from 5,000 as it geared up for greater digital impact.
Casey said, “I admire American Apparel’s commitment to creative thinking and fair treatment of its textile and apparel workers. I am intrigued by the international appeal of the brand and the company’s vertically integrated and Made in USA business model.”
The company didn’t respond to requests for comment.
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