American Apparel has a had a tough run of late, thanks largely to the never-ending slew of lawsuits filed by its fallen founder and CEO Dov Charney and consecutive quarters of sliding sales. Now it appears the Los Angeles-based clothing company is hanging on by a thread.
The New York Post reported Sunday that American Apparel is on the road to ruin, and investors are bracing for the worst when the quarterly earnings come out in the next couple of weeks.
A source revealed to the paper that the company likely has less than $10 million in its coffers, after shelling out for its biannual bond payment in April—for which it received a $15 million loan from hedge fund Standard General—and that it needs to come up with $15.4 million to make the next payment on Oct. 15.
Michael Bigger, who owns about 100 shares, told the Post that he expects the quarter will be “horrible.” American Apparel didn’t respond to a request for comment from the paper.
Shareholders at an annual meeting earlier this month voted against the company’s proposal to issue more shares, thereby limiting the amount of money American Apparel can muster up. In response, the retailer said that even with plans in place to cut $30 million in costs by closing under-performing stores and layoffs, it couldn’t guarantee that it would have sufficient financing commitments to meet funding requirements for the next 12 months without raising additional capital.