American Apparel Inc. has won itself a third extension of the deadline to show that it is in compliance with its loan agreement with Lion Capital.
The Los Angeles-based manufacturer-retailer of trendy basics now has until the end of the day Thursday to show that its earnings before interest, taxes, depreciation and amortization, EBITDA, for the past 12 months is at least $20 million, as required by the Lion agreement. Failure to comply with the covenant could result in the immediate calling of its loans and a possible trip to bankruptcy court.
Initially set to kick in on Jan. 31, the provision was at first extended until the end of the day Feb. 10 and then again through Feb. 14.
“The company is discussing possible amendments to the Lion credit agreement to address its compliance with the specified covenant for future trailing 12-month periods,” the company said in a regulatory filing with the Securities and Exchange Commission. “However, the company can provide no assurance that it will be able to secure such amendments nor, if secured, the terms thereof.”
American Apparel has been embroiled in a series of financing, labor and accounting for more than two years. Lion Capital came to its rescue in March 2009, injecting $80 million into the business and allowing it to pay off a nettlesome $51 million loan from SOF Investment, an arm of Michael S. Dell’s computer fortune.
Shares of American Apparel closed Tuesday at $1.11, down 3 cents or 2.6 percent.