American Apparel in desperate need of cash

American Apparel in desperate need of cash

American fashion chain American Apparel said it will likely not have the funds to survive the next 12 months. It also fears it may not be able to attract additional funds to solve the issue.

No quarterly results

The company fears it may not be able to meet the prerequisites to get a line of credit and that is why it has already asked Capital One (which provides American Apparel with cash) to clear it for those prerequisites. If Capital One does not agree, that may cause plenty of problems for American Apparel.

 

That is also why American Apparel has decided to withhold its quarterly numbers, which it will only do once Capital One gives its answer. It is not surprising to see this turn of events as American Apparel has struggled for years. Over the past 5 years, it has posted one loss after another, which is reflected in its stock value. That plummeted from 540 million to 90 million dollars (500 to 80 million euro).

 

Problems with former CEO

Not only is the company struggling with money, it is also still in a battle with its former CEO and founder Dov Charney. Paula Schneider took over at the start of the year, but that did not go smoothly as the board had suspended Charney after allegations of sexual misconduct and finally let him go at the start of the year. The former CEO immediately countered with a 25 million dollar severance package and sued the company for damages.

 

Irving Place Capital launched a take-over bid late last year, but that was rejected at the time as American Apparel believed it could turn the tide. The company, which manufactures all of its clothing in the United States, has some 250 stores in 20 countries worldwide.

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