American Apparel Receives $80 Million Investment By Lion Capital LLP
Dov Charney, founder and CEO of American Apparel, said, "This investment provides us with a long term solution for our capital structure and an enhanced ability to grow our brand both domestically and internationally over the coming years."
He added that, "Lion Capital's singular focus on the consumer sector and their extensive experience with growing consumer brands makes them an ideal partner as American Apparel continues to develop into a leading, global apparel brand."
The notes will have a coupon of fifteen percent, payable in cash or payable in-kind at the company's option. The notes are callable at any time at par plus accrued interest. The notes provide for a security interest in all assets of the company and its subsidiaries, subject to prior liens with respect to such assets under the company's existing revolving credit facility.
Lion Capital also received detachable warrants for an aggregate amount of sixteen million shares of the company's common stock, exercisable at a strike price set at a five percent premium to the 30-trading day, trailing stock price average as of market close on March 12, which equates to $2 per share. The warrants expire in March 2016.
Assuming conversion of the warrants into common stock, the warrants would equate to a pro forma ownership in American Apparel of around 18%.
In connection with the investment, Neil Richardson and Jacob Capps of Lion Capital intend to join the American Apparel board.
American Apparel will use the proceeds of the investment to retire in full the outstanding amounts on the company's existing second lien credit facility with SOF Investments, L.P. - Private IV, an affiliate of MSD Capital, L.P. Consequently, American Apparel will not issue any additional warrants to SOF Investments as provided in a December 2008 amendment to its SOF Investments credit agreement.
American Apparel will use the remaining proceeds principally to reduce the outstanding balance under the company's revolving credit facility, repay a portion of a shareholder note, pay fees and expenses related to the transaction, and for working capital purposes.
Los Angeles-based American Apparel is a manufacturer, distributor, and retailer of branded fashion basic apparel. As of February 28, American Apparel employed around 10,000 people and operated more than 260 retail stores in 19 countries, including the United States, Canada, Mexico, Brazil, United Kingdom, Austria, Belgium, France, Germany, Italy, the Netherlands, Spain, Sweden, Switzerland, Israel, Australia, Japan, South Korea, and China.
American Apparel also operates a leading wholesale business that supplies T-shirts and other casual wear to distributors and screen printers. The company also operates an online retail e-commerce website.
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