Troubled fashion retailer American Apparel has secured $14.9 million (£9.05 million) in new capital, which effectively saves the company from bankruptcy.
An agreement struck over the weekend will see the retailer sell approximately 15.8 million shares of common stock at $0.90 a share to a group of private investors led by Canadian financier Michael Serruya and Delavaco Capital.
As part of the deal the investors have also received the right to purchase up to an additional approximately 27.4 million shares at the same price within 180 days, subject to terms and conditions.
Chairman and CEO of American Apparel Dov Charney would purchase up to an approximate 0.8 million shares at the same fee, with a similar right to buy up to around 1.6 million shares later on.
It comes just months after falling sales and net losses of more than $86 million in 2010 led the retailer to announce it may not have the sufficient liquidity required to sustain operations for the year ahead.
Since then a strategy to improve operating performance has been implemented, including the recruitment of Tom Casey as Acting President and John Luttrell as Executive Vice President and Chief Financial Officer, culminating in this much needed refinancing arrangement.
Commenting on the deal, Charney said: “We deeply appreciate this vote of confidence from Michael Serruya and his colleagues.
“We are also grateful for the support we’ve received from our lenders.”
Serruya remarked: “We believe in the American Apparel brand and we believe in Dov Charney.
“We are convinced that with adequate resources, Dov and his experienced management team will lead American Apparel to new heights.”
A statement from American Apparel published today revealed the new capital should allow the company to execute its business plan, as well as meet the new increased minimum excess availability requirement of its first-lien lender.