American Apparel Raises ‘Going Concern’ Doubts as Losses Mount

LOS ANGELES, United States — American Apparel Inc. said it may not be able to sustain operations as a going concern for the next 12 months, even after the clothing chain increased its credit line.

A group of lenders, including hedge fund Standard General, replaced its $50 million credit facility with a larger $90 million one, the Los Angeles-based retailer said on Monday. The company said last week that Standard General intended to take this step.

The clothing maker has been in turmoil since it suspended and then fired founder and Chief Executive Officer Dov Charney for alleged misconduct. Charney, who was replaced as CEO by Paula Schneider, has sued over his ouster and said the allegations against him are baseless.

The retailer also on Monday confirmed second-quarter results that it reported on a preliminary basis last week. Sales sank 17 percent to $134.4 million, and the net loss expanded to $19.4 million from $16.2 million.

As of Aug. 11, the chain had $11.2 million in cash. It has a bond-interest payment of about $13.9 million due on Oct. 15.

As a result of its dwindling cash, the company said in a filing that it may have to raise more capital, restructure its debt or seek bankruptcy protection from creditors.

The company declined to comment beyond the filing.

The shares were little changed at 15 cents in late trading in New York after falling 85 percent this year through Monday’s close.

By Matt Townsend; editors: Nick Turner, Kevin Orland, Reed Stevenson.