American Apparel Inc. (APP), the Los Angeles-based clothier, is in talks to raise as much as $160 million from several groups, including a private-equity firm affiliated with Ron Burkle, according to four people familiar with the situation.
The restructuring plan may include a combination of refinancing the company’s debt held by Lion Capital LLP and Bank of America Corp. (BAC) and exercising stock warrants, said the people, who declined to be identified because the talks are private. A deal may be completed in the next 30 days and could be for as little as $90 million, two of the people said. A deal could also take six months, one person said.
The restructuring discussions have included the possibility that Chief Executive Officer Dov Charney will step aside as chairman so he can focus on day-to-day operations, two of the people said. Charney, the company’s largest shareholder, would remain on the board.
American Apparel has been approached by several groups to help the company shore up its finances as its sales results have improved, three of the people said. The parties include private- equity firms Colbeck Capital Management, a New York shop affiliated with Burkle’s Yucaipa’s Cos., and Authentic Brands Group, which is backed by Los Angeles-based Leonard Green & Partners LP, three of the people said.
Charney declined to comment. Representatives of Colbeck Capital and Authentic Brands didn’t respond to requests for comment.
American Apparel rose 4 cents, or 4.1 percent, to $1.01 at 4:15 p.m. in NYSE Amex trading.
The company in April sold $14.9 million in shares to a group of investors from Canada to beef up its finances after losing $86.3 million in 2010 and having to amend loan agreements to avoid breaching debt covenants. Charney blamed the losses on the costs and productivity declines related to replacing 2,500 workers after immigration violations in 2009.
The group of Canadian investors includes entrepreneur Michael Serruya, Delavaco Capital Inc., Authentic Brands and Front Street Investment Management Inc., according to a public filing on Aug. 30.
The investment group in April also received warrants to purchase 27.4 million more shares at 90 cents a share, the same price as its original investment. The investors exercised 8.4 million of those warrants in July. The rest could be used as part of the restructuring.
American Apparel’s net loss narrowed to $213,000 in the quarter ended June 30 from $14.7 million a year earlier. Sales were little changed after dropping in each of the previous four quarters.
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