Thread | NY
The inside line on New York fashion

It's Code Orange for American Apparel

Email
|
Print

    NEWSLETTERS

    In our ongoing coverage of American Apparel's perilous financial situation, we're trying to be optimistic about the company's ability to recover from its current state of distress, while also being realistic about the likelihood of such an outcome—hence, our new rainbow-coded monitoring system.

    The good news is, American Apparel finally managed to file its much-delayed second-quarter results with the SEC, WWD reports. The bad news is just about everything else: the latest filings show substantial losses, as well as expectations that they'll continue through the third quarter of 2010, raising significant "doubts that the company will be able to continue as a going concern," it noted.

    Furthermore, should American Apparel fail to turn enough of a profit to be in compliance with the covenant under its credit agreement with Lion Capital, it might result in all debts being immediately due and payable (and quite possibly the end of American Apparel as we know it).

    There is some more good news, though. Currently the company is working out amendments with its lenders to avoid any covenant noncompliance, in addition to working out strategies to improve its overall operating performance. This might mean the shuttering of a few stores, but hey, you gotta break a few eggs to make an omelet, especially when you have ravenous lenders banging on your door.