American Apparel to get cash infusion from Canadian investors


American Apparel Inc. is getting a desperately needed financial lifeline.

A group of Canadian investors has agreed to inject up to $45 million to help the trendy Los Angeles clothier — and its iconoclastic chief executive, Dov Charney — stave off a potential bankruptcy filing.

The retailer has been buffeted by declining sales and a sagging stock price — not to mention a public-relations firestorm stemming from sexual-harassment lawsuits filed by former employees against Charney.


After an $86-million loss last year and projections of another operating loss this year, the company has repeatedly warned investors about its ability to continue as a going concern.

“I don’t think the company necessarily needed to be saved,” Charney said. “There were a lot of options open to us. But this is a great investment.”

Still, some experts had questioned American Apparel’s future given the financial woes and the furor surrounding Charney’s relations with some female employees.

Larry Perkins, head of West Coast operations for Conway Mackenzie, a restructuring firm, likened the recapitalization to a last-second pass allowing a football team to avoid defeat.

“They got a Hail Mary,” Perkins said. “If you were to ask me three days ago if this would happen I’d have said no. This is a unique deal. Clearly you have an investor group that believes in the brand and in Dov, and they have chosen to go long on both of those.”

The investors agreed to pump in $15 million in equity at 90 cents a share, a 27% discount to its $1.24 closing price Thursday. The stock market was closed Friday in observance of Good Friday.


The investors also are getting warrants to buy an additional $30 million worth of shares over the next six months, also at 90 cents a share.

Charney agreed to contribute $700,000 of his own money. However, unlike other existing investors, whose ownership stakes will be diluted by the issuance of shares to the new investors, Charney said his prior ownership stake can be restored if the stock price rises in coming years.

The investment group is headed by Michael Serruya, a prominent Canadian financier.

“Our investment in American Apparel is as much a vote of confidence in Dov as it is to American Apparel,” Serruya said.