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American Apparel Secures New Investment

(4/11/2014)

Counselor Top 40 supplier American Apparel (asi/35297) has received a cash boost from a European investor, just in time to pay its bills, according to several published reports. Last month, Swiss firm FiveT Capital AG bought more than 61 million shares of the California-based apparel company stock, at 50 cents each, raising at least $28.5 million for a brand facing debt and recent weak sales. With the stock purchase, FiveT became American Apparel’s largest outside investor, gaining a nearly 13% stake.

In an interview with Bloomberg, Johannes Minho Roth, the CEO of FiveT, called American Apparel’s Dov Charney “a visionary.” He added: “Dov wants to make it his life goal to make American Apparel into a successful company. I have a very positive view on him.” Charney, American Apparel’s founder and top officer, has not publicly commented on FiveT’s investment.

American Apparel’s retail sales have been poor of late, with store revenues down 7% in February. Wholesale revenues – which include sales within the ad specialty industry – have been faring better, increasing 9% in February. Overall, the brand’s 2013 sales were up 3%, reaching $634 million. With North American ad specialty sales of $96.8 million in 2012, American Apparel ranks 14th on Counselor’s list of the largest suppliers in the industry.

But a costly new distribution center that didn’t perform as well as expected left American Apparel facing a cash crunch, with an interest payment of $13.4 million due this month, on $206 million of bonds issued just last year, according to Bloomberg. As of December 31, 2013, the company reportedly only had $8.7 million of cash on hand.

FiveT Capital is known for investing in small companies and taking an activist role in troubled businesses, and the firm has categorized its stake in American Apparel as non-passive, saying in a filing that it may discuss strategy, management changes and transactions with the company and other shareholders. Roth told Bloomberg he’s already sharing ideas with Charney, and will focus on helping American Apparel improve its finances, possibly by seeking to lower the interest rate on its debt.



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