Billionaire h hedge funder Soros and CEO Dov Charney -both been entangled in lawsuits with young, beautiful women — is backing a firm that’s in talks to extend a credit line worth as much as $80 million to the clothing chain. The credit facility from Crystal Financial, a Boston-based firm that boasts Soros’ hedge fund as its lead investor, will immediately replace and expand a $75 million revolving credit line from Bank of America that matures in July, sources said.
Specific terms of the credit agreement couldn’t be learned, but it will be “long term,” albeit at a higher interest rate than at the Bank of America facility, according to a source briefed on the negotiations. The deal could be finalized as soon as this week. Officials at Los Angeles-based American Apparel declined to comment. Crystal Financial couldn’t be reached for comment. The expanded credit line will be a relief to Charney, who lately has tapped out nearly all sources of liquidity as he scrambles to turn around the struggling hipster clothier.
In addition to a nod from Soros, the agreement has won the crucial approval of Lion Capital, a British-based fund that holds a term loan to American Apparel of nearly $90 million.
At the time, sources said Lea had fretted that Burkle might try to seize control of the retailer through the asset-backed loan.
But American Apparel’s improving sales lately have made the prospect of a bankruptcy, which could trigger a debt-holder takeover, less likely, insiders said.
Indeed, Lea — a fashion-focused investor who last week beefed up his portfolio by acquiring rock ’n’ roll men’s label John Varvatos — believes that American Apparel “is in the best shape it has been in in more than two years,” according to a source close to the investor.
In December, Charney had said he was on track to generate at least $20 million in earnings before interest, taxes, depreciation and amortization, or Ebitda, for 2011. But the final figure came in below $15 million, according to one preliminary estimate, hurt by steep discounting that included a slew of Groupon sales nationwide.
Nevertheless, the big picture for the racy retail chain looks more positive, as sales momentum is building. Comparable-store sales have surged 11 percent in January and February, the company said last week.
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