American Apparel Inc. reportedly is looking for a buyer as its creditors are increasingly losing patience with the struggling Los Angeles apparel manufacturer and retailer, according to media reports.
Private equity newsletter PEHub, citing three people familiar with the matter, said in its Wednesday online edition that major creditor Lion Capital has hired restructuring firm Miller Buckfire & Co. to consider its options in case the company files for Chapter 11 reorganization, as the company warned in a regulatory filing last week might occur.
American Apparel Chief Executive Dov Charney, reached by telephone, declined to comment, according to the PEHub report. The company last week said in a Securities and Exchange Commission filing that Charney was again the largest single shareholder, increasing his stake to 54 percent by converting some notes he held on the company into equity.
American Apparel reported a net loss of $86 million last year, compared with net income of $1.1 million in 2009, according to its 10k annual filing. It also disclosed that it retained a financial advisory firm to identify alternative sources of capital to finance operations. PEHub identified the advisor as the restructuring arm of investment bank Rothschild.
American Apparel has been struggling to recover from a recession-led sales slump, aggravated by the need to hire and train more than 1,000 workers following an immigration inspection in late 2009. The company said in its fourth quarter report that it expected to report a loss from operations and negative cash flows this year, leaving it with “substantial doubt that the company will be able to continue as a going concern.”
Up until now, the company has been able to work with creditors to avoid a covenant breach on its debt. But Women’s Wear Daily reported Wednesday that two banks have given the company until April 30 to prove it is a “going concern” or they will call in their loans.
Shares were down 3 cents, or 3.6 percent, to 79 cents in midday trading on the New York Alternet.