American Apparel Inc. has a new credit facility, but hasn’t gotten out from under its liquidity woes.
The company said it was not in compliance with its $50 million Capital One credit facility at the end of the second quarter, as it previously indicated might be the case.
But Capital One assigned its rights as a lender to a group of the company’s creditors including Standard General, Monarch Alternative Capital, Coliseum Capital and Goldman Sachs Asset Management. William Trust was named as administrative agent and waived the covenant violations on the facility, which was boosted to $90 million and matures in August 2018.
Despite that lifeline, American Apparel is still in dire financial straits.
The company said again that based on current trends, “we may not have sufficient liquidity necessary to sustain operations for the next 12 months.”
“As a result of the Capital One Credit Facility covenant default and the liquidity uncertainty…we have been working with our advisers and have begun discussions with certain key financial stakeholders to analyze potential strategic and financial alternatives, which may include, among other things, refinancing or new capital raising transactions, amendments to or restructuring of our existing indebtedness and other obligations, and consideration of other restructuring and recapitalization transactions,” the firm said.
As of Aug. 11, the company had $11.2 million cash on hand. That’s an increase versus the end of the second quarter on June 30, when the company had $6.9 million in cash.
American Apparel has $210.6 million in long-term debt, which requires an interest payment of about $13.9 million on Oct. 15.
The company’s second-quarter net loss widened to $19.4 million, or 11 cents a share, from $16.2 million, or 9 cents a year earlier. Sales for the three months fell 17.2 percent to $134.4 million from $162.4 million.
Standard General linked with Dov Charney after the company ousted the colorful founder last year. The two sides had a falling out, though, and Charney was fired in December, setting lawsuits flying.