US chain American Apparel has re-negotiated the terms of a loan agreement with its lender Lion Capital, but will have to significantly boost profitability over the next three years to keep in with the terms of the new deal.
The terms outline that American Apparel has to post consolidated EBITDA of $20m (£12.6m) for the 12 months to January 31, 2011. This profitability figure rises over the next three years, with a required EBITDA of $80m (£50.6m) for the year to September 2013, according to reports.
Lion Capital said it would also draft in new senior executives to help bolster the management team.
Lion founder and partner Lyndon Lea told reporters: “Lion Capital has enormous admiration for both American Apparel and its founder, Dov Charney. We are working together with Dov to realign the capital structure of American Apparel to support a number of key initiatives within the business, including the hiring of several new senior executives.”
In June, the chain renegotiated its debt covenants to avoid breaching them and last month, American Apparel was granted an extension by the New York Stock Exchange to file its second quarter results for the three months to June 30, to avoid being delisted. It has until November 15 to file its figures.
In August, the retailer said that it “may not have sufficient liquidity necessary to sustain operations for the next 12 months” after revealing it had debts of $120.3m (£76.9m) and that second quarter operating losses would be between $5m (£3.2m) and $7m (£4.5m).
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