American Apparel Said to Hire FTI to Help Operations
American Apparel CEO Dov Charney
Keith Bedford/Bloomberg
Dov Charney, chairman and chief executive officer of American Apparel Inc.
Dov Charney, chairman and chief executive officer of American Apparel Inc. Photographer: Keith Bedford/Bloomberg
American Apparel Inc., the Los Angeles clothing retailer in danger of being delisted, hired FTI Consulting Inc. to help turn the company around, according to three people familiar with the matter.
FTI is advising on liquidity and boosting productivity in the company’s factories, said one of the people, who declined to be named because the information isn’t public. West Palm Beach, Florida-based FTI, which advises companies on litigation, mergers and restructuring matters, has worked with Circuit City Stores Inc., CIT Group Inc. and Ritz Camera Centers Inc.
American Apparel, led by Chief Executive Officer Dov Charney, fielded inquiries from regulators over changing accounting firms and risks removal from the NYSE Amex for failing to file financial reports on time. The company, which targets young people with colorful T-shirts and dresses, has posted back-to-back quarterly losses after expanding too fast.
Charney, 41, has stopped opening stores after boosting locations by more than 50 percent in the past two years. While new locations helped sales climb 41 percent in 2008, the gains slowed to 2.5 percent last year as new stores cannibalized business at older ones, Chief Financial Officer Adrian Kowalewski said in March.
Kowalewski didn’t immediately return a call seeking comment. Nicole Madison, a spokeswoman for FTI, declined to comment. Debtwire reported the company and FTI were in talks earlier.
Today the retailer said it amended an $80 million loan agreement with London-based Lion Capital LLP for a fourth time, helping it avoid violating debt covenants. The change postponed until next year a requirement for American Apparel to achieve an earnings target.
Breach
In August, the company said operating losses might put it in breach of a debt covenant, giving lenders the right to demand immediate repayment. The new agreement requires the retailer to post $20 million in earnings before interest, taxes, depreciation and amortization in the 12-month period beginning Jan. 31.
American Apparel rose 20 cents, or 16 percent, to $1.43 at 4:01 p.m. in NYSE Amex composite trading. The exchange has given the retailer until Nov. 15 to file its results for the quarter ended June 30, following the change in auditors.
Deloitte & Touche LLP quit as the company’s auditor in July and told American Apparel its 2009 financial statements may not be reliable. The change prompted a subpoena from the U.S. attorney’s office for the Southern District of New York and inquiries from the U.S. Securities and Exchange Commission.
To contact the reporters on this story: Lauren Coleman-Lochner in New York at llochner@bloomberg.net; Matt Townsend in New York at mtownsend9@bloomberg.net
To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net
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