US fashion retailer American Apparel is close to negotiating a debt revision with its UK backer, private equity group Lion Capital, according to reports.
The deal would prevent it breaching a debt covenant as the retailer ran into difficulty repaying debt to Lion Capital.
According to Reuters a source close to the situation said that after weeks of talks a deal to loosen the terms of the covenant is imminent.
The eccentric founder and chief executive Dov Charney is now facing criticism from investors and analysts; last month American Apparel lost half its value when it announced it may breach a second-quarter covenant.
In March last year Lion Capital funded a last-minute $80m (£54.5m) loan at the height of the banking crisis.
Earlier this year Charney had said he was “elated” after another debt covenant was loosened by Lion. “I think we’re going to be fine in this area, in the area of covenants,” he said.
In the three months to the end of March sales at American Apparel grew 6.6% to $121.8m (£83m).