American Apparel: We don’t know what this means, but it doesn’t sound good.

31 August 2011

Another week, another ‘Could this be it for American Apparel?’ story. And this time, things are not looking peachy at all.

Back in April, the company received an injection of cash when a group of Canadian investors purchased $15 million worth of shares, which were followed up by another $8.3 million but now – just four months after said transaction (and we’re going to quote this direct from WWD, because the facts slightly hurt our brain) ‘American Apparel registered 43.2 million shares for a potential secondary offering, which encompasses the 24.2 million shares the Canadian investment group now holds, in addition to the 19 million shares they hold the right to purchase’. Whatever this means, it doesn’t sound great.

Currently, AA owes a massive $83.8 million to London based Lion Capital, which it is reportedly paying back at an 18% interest rate. This could have been paid off using a loan from Leonard Green & Partners, who recently offered $100 million, secured by American Apparel’s brand name and intellectual property, but American Apparel founder Dov Charney, who owns a 47.1% stake in the company, said ‘non, merci’ to that offer.

Gulp. We really like American Apparel; the jersey is pricey, yes, but it is still ethically produced in LA (the dubious ethics of Dov Charney and having topless models in their ad campaigns notwithstanding) and the pieces, particularly the basics, have the ability to become wardrobe staples in about three days. So we would really, really like to see the company settle its financial difficulties so that they can continue producing delightfully hued crew necks for years to come. Thank you.

- Alex Butt


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