* Says interest payable raised
* Billionaire Ron Burkle reveals 6 pct stake
* Shares up 7.3 pct after bell
June 24 Clothing maker American Apparel Inc
APP.A has struck a deal with creditors and secured a
high-profile billionaire investor, dodging a potential breach of
debt covenants and sending its shares up 7 percent.
The agreement, announced on Thursday, came at the price of
higher annual interest payments. A separate filing on Thursday
showed that billionaire Ron Burkle now holds a 6 percent stake
in the company, which is known for its shiny spandex leggings
and cotton T-shirts.
Sources had told Reuters earlier this month that the ailing
American Apparel, run by the outspoken, volatile Dov Charney,
would manage to snag a much-needed lifeline from creditors.
The company, a staple of urban hipsters for "Made-in-USA"
retro apparel, said on Thursday it had managed to amend its credit
agreements, averting a potential violation of terms agreed to on
But that agreement raised its annual interest payable to 17
percent from 15 percent.
The flamboyant Charney, who has repeatedly been sued for
sexual harassment, remains the largest shareholder, with more
than 53 percent of American Apparel shares.
American Apparel has run into numerous problems of late,
from underperforming results to mass layoffs of illegal
workers. It warned last month it may breach debt covenants,
wiping nearly 14 percent off its share value. [ID:nSGE62O0HX]
The company has blamed its lackluster performance on "highly
uncertain sales trends." Its same-store-sales, a key measure of
retail health, declined 10 percent in the first quarter.
Its stock was down 43 percent year-to-date. The shares,
which rose as much as 8 percent Thursday before closing down
marginally at $1.77, were again up 7.3 percent to $1.90 in trading
after the bell, following the stake disclosure.
On Thursday, the company said the credit amendment replaces
a total debt to EBITDA (earnings before interest, taxes,
depreciation and amortization) financial covenant with a
minimum EBITDA financial covenant.
That essentially removed a cap on the amount of debt
relative to EBITDA that the company can hold.
As part of the deal, lender Lion/Hollywood LLC will also be
entitled to board representation and got warrants to buy 16
million shares at an exercise price of $2.00 each, the company
said in an SEC filing.
In March of 2009, Lion had made a last-minute $80 million
loan to American Apparel.
Burkle has acquired 4.3 million shares in the open market for
about $5.9 million since June 10, viewing the shares as
undervalued at the time, a filing with the U.S. Securities and
Exchange Commission showed.
(Reporting by Vidya Lakshmi and Abhishek Takle in Bangalore;
Editing by Vyas Mohan and Anthony Kurian)