Daily News: March 14, 2012

American Apparel Replaces Revolver, Amends Second Lien Loan

American Apparel, Inc., a vertically integrated manufacturer, distributor and retailer of branded fashion basic apparel, announced it has replaced its existing $75 million senior credit facility that was due to expire in July 2012 with a three-year $80 million senior credit facility with Crystal Financial as administrative agent and Salus Capital Partners, as documentation agent.

In addition, the company has amended and extended the maturity of its second lien credit facility with Lion Capital and affiliates. These actions, when taken together, will provide the company with additional borrowing capacity and financial flexibility as it continues to build upon recent positive momentum in its business.

The credit facility is composed of a $30 million term loan with the balance of the commitment being provided as revolving credit. Borrowings are at 900 basis points over the LIBOR rate and are secured by substantially all of the assets of the company. The credit facility matures on March 13, 2015.

The company has also extended the maturity date of the second lien loan by two years to December 31, 2015, and has negotiated an easing of the minimum EBITDA financial covenant of the second lien loan. In addition, the company has agreed that with respect to interest accruing from and after September 1, 2012, it will pay a minimum of 5% of each interest payment on outstanding principal under the Second Lien Loan in cash (with the remainder of its interest being paid in cash or accrued, at the election of the company). In connection with the extension, the company agreed that if it fails to maintain specified minimum quarterly EBITDA targets as defined in the extension amendment the exercise price of Lion’s outstanding warrants will be reduced by $0.25. The company also extended the maturity of the warrants by four years.

Dov Charney, chairman and CEO of American Apparel, said, “These financial agreements, coupled with improved financial performance, will provide added flexibility in delivering upon our operating plan for 2012 and beyond. We have made steady progress in building sales and improving our financial performance in the past year; securing the refinancing of our debt should provide our stakeholders with confidence about our ability to continue our momentum and deliver upon our commitments. We have significant goals for our 2012 performance and so far we are off to a good start.”

He added, “Crystal Financial has significant retail experience, understands our business and has an appreciation of the significance of the recent improvements in our operating performance. We are fortunate to have them as a new business partner. Also, the vote of confidence and support from Lion Capital by way of the loan extension and other accommodations is also significant. We truly value their partnership.”

Stephen Krawchuk, managing director of Crystal Financial, said, “American Apparel has made great strides over the past year in improving its overall financial performance and we are pleased to be in a position to provide them with the financial flexibility needed to continue to build upon that momentum. The transactions announced today will provide an immediate benefit to American Apparel and we look forward to a long and mutually beneficial relationship with the company.”

The company engaged Cowen and Company as its financial advisor for these transactions.

Crystal Financial is an independent commercial finance company that provides senior and junior secured revolvers and term loans for both asset-based and cash flow financings to middle-market companies.

Previously on abfjournal.com:

Bloomberg: American Apparel Said to Hire FTI to Help Operations, Monday, October 04, 2010

Lion Capital Provides $80 Million to American Apparel, Friday, March 13, 2009