It’s crunch time for American Apparel Inc., as the cash-poor retailer of trendy tights and T-shirts faces two key financial deadlines this month.

This story first appeared in the March 10, 2009 issue of WWD. Subscribe Today.

Following an expensive refinancing in December, American Apparel must raise $16 million in new financing by Friday in order to avoid issuing warrants for two million shares to lender SOF Investments, to which it owes $51 million. American Apparel already issued warrants for one millions shares to SOF in December, plus fees of $2.6 million, under terms of its refinancing.

More critical is a March 21 deadline to renew or extend the April 20 maturity date of the SOF loan. If American Apparel cannot renegotiate the loan by that date, $60.6 million under a Bank of America credit facility would immediately become due. Additionally, if and when that SOF agreement is extended, American Apparel must make a $3.5 million amortization payment to SOF, with another $12.6 million due on April 20.

American Apparel’s cash squeeze was highlighted by a $4 million loan that founder and chief executive Dov Charney made to the company on Feb. 10, according to Securities and Exchange Commission documents. That borrowing was on top of a $2.5 million loan he made to American Apparel in December. Both loans were made at an annual interest rate of 6 percent.

“Those loans are a horrible sign for the company,” said Howard Davidowitz, chairman of Davidowitz & Associates, a retail consulting and investment banking firm based in New York. “The last time I saw this done was when the Boscov family put money into Boscov’s, right before it went bankrupt in 2008.”

As of Sept. 30, American Apparel had $13.9 million in cash on it balance sheet and $111.6 million in debt.

“This is the worst credit environment since the Great Depression and for American Apparel to be dependent on creditors is a terrible position,” added Davidowitz. “That is reflected in the stock price, which shows investors believe the company is a candidate for bankruptcy — despite its positive performance at retail — due to its highly leveraged position and dependency on lenders.”

American Apparel shares closed down 22 cents at $1.37 on Monday, well off their 52-week high of $11.90.

Reached Monday, Charney declined to comment on American Apparel’s financing activities, but noted: “I am very confident about our company. I am feeling great about the business and believe we will have a fantastic year.”

American Apparel opened 81 stores last year, and in February opened three more units — in Miami Beach, Fla., Bleecker Street in New York and Stockholm, bringing the total worldwide door count to over 260. However, its lenders have forced the company to limit capital expenditures this year to $17.8 million, which will slow store openings.