LOS ANGELES–(BUSINESS WIRE)– American Apparel, Inc. (NYSE Amex:APP), a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel, announced it has replaced its existing $75 million senior credit facility that was due to expire in July 2012 with a three year $80 million Senior Credit Facility (the “Credit Facility”) with Crystal Financial LLC as Administrative Agent and Salus Capital Partners, LLC as Documentation Agent. In addition, the Company has amended and extended the maturity of its second lien credit facility with Lion Capital, LLP and affiliates (the “Second Lien Loan”). These actions, when taken together, will provide the Company with additional borrowing capacity and financial flexibility as it continues to build upon recent positive momentum in its business.
The Credit Facility is composed of a $30 million term loan with the balance of the commitment being provided as revolving credit. Borrowings are at 900 basis points over the LIBOR rate and are secured by substantially all of the assets of the Company. The Credit Facility matures on March 13, 2015.
The Company has also extended the maturity date of the Second Lien Loan by two years to December 31, 2015, and has negotiated an easing of the minimum EBITDA financial covenant of the Second Lien Loan. In addition, the Company has agreed that with respect to interest accruing from and after September 1, 2012, it will pay a minimum of 5% of each interest payment on outstanding principal under the Second Lien Loan in cash (with the remainder of its interest being paid in cash or accrued, at the election of the Company). In connection with the extension, the Company agreed that if it fails to maintain specified minimum quarterly EBITDA targets as defined in the extension amendment the exercise price of Lion’s outstanding warrants will be reduced by $0.25. The Company also extended the maturity of the warrants by four years.
Comment of Dov Charney, Chairman and CEO of American Apparel, Inc.
“These financial agreements, coupled with improved financial performance, will provide added flexibility in delivering upon our operating plan for 2012 and beyond. We have made steady progress in building sales and improving our financial performance in the past year; securing the refinancing of our debt should provide our stakeholders with confidence about our ability to continue our momentum and deliver upon our commitments. We have significant goals for our 2012 performance and so far we are off to a good start.
Crystal Financial has significant retail experience, understands our business and has an appreciation of the significance of the recent improvements in our operating performance. We are fortunate to have them as a new business partner. Also, the vote of confidence and support from Lion Capital by way of the loan extension and other accommodations is also significant. We truly value their partnership.”
Comment of Stephen Krawchuk, Managing Director of Crystal Financial LLC
“American Apparel has made great strides over the past year in improving its overall financial performance and we are pleased to be in a position to provide them with the financial flexibility needed to continue to build upon that momentum. The transactions announced today will provide an immediate benefit to American Apparel and we look forward to a long and mutually beneficial relationship with the Company.”
Comment of John Luttrell, CFO of American Apparel, Inc.
“We had several objectives related to the refinancing of our capital structure. We wanted to replace our existing senior credit facility with a long-term facility at commercially appropriate rates with additional capacity. This Credit Facility meets all of those criteria. We also hoped to extend the Lion debt in a manner that would not dilute our equity shareholders and give us the added flexibility to ultimately take out this credit agreement as operating results continue to improve. The Lion amendment achieves this objective. With the actions taken today, we have a clear path for the next three years to concentrate on our business and deliver solid operating performance improvements. Our estimated cash flows fully support the added interest payments when compared to our prior senior secured facility. Most important, we have concluded that there is no longer substantial doubt about our ability to continue to operate as a going concern.”
The Company engaged Cowen and Company as its financial advisor for these transactions.
About American Apparel
American Apparel is a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel based in downtown Los Angeles, California. As of February 29, 2012, American Apparel had approximately 10,000 employees and operated 250 retail stores in 20 countries, including the United States, Canada, Mexico, Brazil, United Kingdom, Ireland, Austria, Belgium, France, Germany, Italy, Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Japan, South Korea, and China. American Apparel also operates a leading wholesale business that supplies high quality T-shirts and other casual wear to distributors and screen printers. In addition to its retail stores and wholesale operations, American Apparel operates an online retail e-commerce website at https://www.americanapparel.net.
About Crystal Financial
Crystal Financial is an independent commercial finance company that provides senior and junior secured revolvers and term loans for both asset-based and cash flow financings ($10 million to $150 million) to middle-market companies. Its team of experienced, responsive professionals have underwritten, closed and managed more than $20 billion in secured debt commitments across a wide range of industries. For more information and media contacts, please visit www.crystalfinco.com.
For Crystal Financial:
Peter Duckler/Pam Flores