American Apparel Inc. (APP) has secured rescue financing from a
group of private Canadian investors that could pump as much as $43
million into the troubled clothing retailer, the New York Post
reported Friday.
The deal, struck after several days of talks between the
investors and the Los Angeles company's board, calls for putting
$15 million into American Apparel up front, with the option of
investing an additional $28 million during the next six months.
The Post identified one of the investors as Essentia Equity, a
firm once headed by Michael Serruya, a Canadian financier who led a
bailout of Jamba Juice in 2009. Serruya also co-founded CoolBrands
International Inc.
One source told the newspaper that American Apparel's chief
executive, Dov Charney, is adding $700,000 of his own savings to
the $15 million financing deal. Other shareholders will be diluted
by the deal, but Charney, who founded the retailer and is also its
chairman and biggest shareholder, can reverse the dilution for
himself if the stock's value climbs over the next four years.
The Canadian investors will be able to exchange their cash and
warrants for shares priced at 90 cents -- a discount of more than
27% to Thursday's closing price of $1.24. If they exercise all
their warrants, the group would own nearly one-third of American
Apparel's total outstanding shares.
To ease concerns of Bank of America Corp. (BAC), which provides
American Apparel's credit line, the company will carry an
additional $5 million in available cash on its balance sheet; the
current requirement is $7.5 million. In exchange, the bank waived a
debt covenant that would have been breached at the end of
April.
At Bank of America's insistence, according to one source,
American Apparel will likely appoint an executive from FTI
Consulting Inc. (FCN) to "keep a close eye on the cash
balance."
Full story at
http://www.nypost.com/p/news/business/more_love_for_dov_cZ3WGYJChi9kLciHzLi8SN
-Dow Jones Newswires; 212-416-2900