American Apparel Inc. and Lion Capital have amended the terms of their credit agreement after four extensions.

 

Gone is the old language requiring the Los Angeles-based retailer to maintain earnings before interest, taxes, depreciation and amortization of at least $20 million over a trailing 12-month period. Replacing it is wording that boosts the effective interest rate on its $80 million loan from Lion to 18 percent from the initial 15 percent until the retailer files its financial statements for the quarter ending March 30; maintains a debt-to-EBITDA ratio of four-to-one or less for four consecutive quarters, and maintains positive EBITDA for 12 consecutive months.

 

According to a regulatory filing with the Securities and Exchange Commission Tuesday, the amendment also provides for Lion, which rescued American Apparel from a nettlesome loan agreement with SOF Investments two years ago, to hold warrants, at an initial exercise price of $1.11, which would allow the equity fund to maintain its current stake in American Apparel in the event that a sale or issuance of shares threatened to dilute it to a lower level. That price, 1 cent lower than the $1.12 at which shares of AA closed Tuesday, can be lowered based on certain conditions.

 

Dov Charney, chairman, president and chief executive officer of the company, has agreed to vote his shares in favor of such price adjustments if they become necessary and subject to a shareholder vote.

 

When American Apparel filed its definitive proxy with the SEC last October, Charney owned 53.3 percent of the company’s common stock versus Lion’s 18.3 percent stake.

 

The four waivers that preceded the new credit terms all have occurred since Jan. 31.

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