* Lion Capital to give $80 mln in financing
* Firm to get warrants to buy 18 pct of company
* Lion Capital receives two board seats
* American Apparel shares up 30 pct
(Adds analyst note)
By Martinne Geller
NEW YORK, March 13 American Apparel Inc APP.A
said on Friday that it received about $80 million in financing
from British private equity firm Lion Capital LLP, and the
clothing maker's shares soared 30 percent.
American Apparel, which is known for brightly colored
basics, pro-labor policies and racy marketing, said the deal
with Lion Capital involved secured second lien notes maturing
Dec. 31, 2013. Lion Capital also received warrants which, if
exercised, would give it about an 18 percent stake in the
American Apparel said it planned to use the loan to repay
outstanding amounts on an existing second lien credit facility
with an affiliate of MSD Capital. It also plans to reduce the
balance of its revolving credit facility, repay a portion of a
shareholder note, pay fees and expenses related to the deal,
and fund its working capital needs.
American Apparel, which manufactures its clothes in downtown
Los Angeles, has been growing rapidly, with stores in 19
"This investment provides us with a long-term solution for
our capital structure and an enhanced ability to grow our brand
both domestically and internationally over the coming years,"
Chief Executive Dov Charney said in a statement.
Analyst Todd Slater of Lazard Capital said he estimates the
new capital -- which has alleviated recent liquidity concerns --can fund the company for the next five years.
"The free cash flow generated by American Apparel over the
next five years, even as it self-funds its own growth, should be
more than enough to pay down all outstanding debt and allow for
excess cash on the balance sheet," he added.
Under the deal, Lion Capital received warrants for 16
million shares of American Apparel stock with a strike price of
$2 a share, or a 5 percent premium to their trailing 30-day
Exercising the warrants would translate to about an 18
percent stake in the company, whose shares closed at $1.49 on
Thursday on the American Stock Exchange. The shares were up 45
cents at $1.94 after rising to $2.04 on the American Stock
Exchange on Friday morning.
In addition, Lion Capital's Neil Richardson and Jacob Capps
intend to join American Apparel's board.
That may help boost investor confidence about corporate
governance at the company, Slater said.
London-based Lion Capital, which focuses on consumer
investments, has invested in Jimmy Choo [TOWBRJ.UL], Kettle
Foods [KETFD.UL], Orangina Schweppes and Weetabix WEEBF.PK.
(Reporting by Martinne Geller in New York and Ratul Ray
Chaudhuri in Bangalore; additional reporting by Alexandria Sage
in San Francisco; Editing by Mike Nesbit, Lisa Von Ahn, Dave