Ron Burkle could be getting closer to a deal with American Apparel.
The retailer is in the final stages of negotiating a loan in the neighborhood of $90 million from Colbeck Capital Management LLP, an investment firm affiliated with Burkle’s Yucaipa Cos., said sources close to the deal. At the same time, the embattled American Apparel has embarked on a round of large-scale warehouse sales to raise cash from out-of-season stock, slightly damaged goods and novelty fashion items. The first warehouse sale event took place in Montreal last week.
A deal with Colbeck Capital would allow American Apparel to retire $56.5 million in first lien loans from Bank of America and Bank of Montreal. Some portion of the remaining capital raised from Colbeck would go toward reducing the $83.8 million in term loans American Apparel owes to London-based Lion Capital under a punishing 18 percent interest rate. Another portion of the funds would be funneled toward operations and capital expenditures.
Colbeck is an investment firm that focuses on credit opportunities including distressed debt, strategic lending and other fundamental, value-based and event-driven investments. The firm was founded in 2009 by Jason Colodne and Jason Beckman, former Goldman Sachs bankers.
In 2010, Colbeck partnered with Burkle and his Yucaipa Cos. to back Harvey Weinstein and Bob Weinstein in their failed attempt to buy back Miramax Films.
In its talks with American Apparel, Colbeck has edged out Leonard Green & Partners, which had also made a play to bail out American Apparel. The latter deal has been shelved by American Apparel chairman and chief executive Dov Charney, said sources.
On Friday, shares of American Apparel closed down a penny to 88 cents.
The price is below the 90 cents a share strike price for warrants for 19 million shares that a group of Canada-based investors led by Michael Serruya still hold. Those warrants expire on Oct. 27. If they are exercised, American Apparel would receive up to $17.1 million.
The warehouse sales launched last week are a new revenue stream for American Apparel, with the three-day sale in Montreal bringing in about $375,000. This week, the company will hold another warehouse sale in Ottawa, Canada.
A warehouse sale is planned for Los Angeles on the weekend of Oct. 14, to be held at the company’s headquarters and production building, and another sale is scheduled next month for Quebec City.