APP - American Apparel

[Olmsted]

S&P has a rating out today on a $200m note issue: 

 

http://www.standardandpoors.com/prot/ratings/entity-ratings/en/us/?sectorCode=CORP&entityID=26449247

 

I don't have access, but according to @ValGARP on twitter, the S&P note has total debt at $209m after the notes issue.  That means they just refi-ed, which is huge. 

 

Will be watching for PR on terms.

 

[paologorgo]

http://www.moodys.com/research/Moodys-assigns-American-Apparels-CFR-and-senior-secured-note-ratings--PR_267695

 

[nnayyar]

$APP is a company I've been following. They just released a PR regarding pricing of notes to refinance existing high cost debt:

http://www.sec.gov/Archives/edgar/data/1336545/000110465913025919/a13-8714_1ex99d2.htm

 

American Apparel, Inc. (the “Company”) (NYSE MKT: APP) announced today the pricing of $206,000,000 aggregate principal amount of its 13.0% Senior Secured Notes due 2020 (collectively, the “Notes”).  The Notes will be issued at 97% of par.  The Company intends to use the net proceeds from the offering of the Notes, together with borrowings under a new asset-backed revolving credit facility, to repay in full and terminate our credit facilities with Lion Capital, LLC and Crystal Financial LLC and, to the extent any proceeds are remaining, for general corporate purposes.  The Company anticipates that the closing of the offering will take place on or about April 4, 2013, subject to customary closing conditions, including the concurrent closing of the new asset-backed revolving credit facility.

 

The Notes will be the senior secured obligations of the Company and will be guaranteed, on a senior secured basis, by the Company’s domestic restricted subsidiaries, subject to some exceptions.

 

 

A quick YTM calculation I did comes to 13.69% YTM. On 206MM debt that is $28.2MM. In FY12 the interest expense was ~41MM (it was only 33MM FY11) which results in a saving of 12.8MM, loss in FY12 was 37MM (0.35/sh)

 

In this debt environment, 13.5% seems quite high. The company certainly has a lot of hair on it but considering that JNK yields ~7% this still seems very high.

 

I also don't know exactly what happens to the warrants that were issued with the original debt offering but at least the PIK financing should be gone. 

[Olmsted]

Well I for one expected a lower rate.  But it's an improvement, and well, it's better than a sharp stick in the eye. 

[texual]

Great company for a leveraged buyout or outright hostile takeover by a bigger company maybe JCP could get into partnership with them? I am serious because I saw the higher end JCP stores with many more 'shops' and this brand would be perfect in their slew of shops.

[PlanMaestro]

Timeline: http://www.readability.com/articles/ktlbeyrs

On JCPenney: http://www.readability.com/articles/idzorqbo

[Olmsted]

Timeline: http://www.readability.com/articles/ktlbeyrs

On JCPenney: http://www.readability.com/articles/idzorqbo

 

Thanks for the links, Plan.  I like how they are at the forefront in green energy, and how they found something for the models to do in the downtime between shoots.  That's operational excellence! (slide 16 in Plan's link, or direct link here:

http://www.businessinsider.com/dov-charney-gets-girls-in-bikinis-to-clean-his-factory-roof-2012-3 )

[PlanMaestro]

Crazy genius.

[PlanMaestro]

http://finance.yahoo.com/news/american-apparel-inc-announces-comparable-120000776.html

http://www.thedailybeast.com/articles/2013/05/08/american-apparel-s-dov-charney-on-the-bangladesh-tragedy.html

 

[prunes]

I'm trying to track down the source of the $800mm manufacturing capacity figure I see thrown around. Anyone know?

 

Also, trying to track down the earnings calls transcripts if anyone knows where I can find them.

[nnayyar]

Prunes,

 

I believe the 800MM was given in a Press Release, possibly one of the SSS announcements. They currently do not do conference calls (hence no transcripts!) The CFO though is readily available and I've spoken with him before.

[PlanMaestro]

I'm trying to track down the source of the $800mm manufacturing capacity figure I see thrown around. Anyone know?

 

Also, trying to track down the earnings calls transcripts if anyone knows where I can find them.

 

Dov said in the last Q conference that it was between 800 and 900 million.

[PlanMaestro]

Crazy.

 

http://biggercapital.squarespace.com/biggercapital-investment/2013/5/14/american-apparel-doing-the-impossible.html

[prunes]

I wonder if they'll outsource manufacturing and design or do it all in house.

[yader]

Here's an update on APP.  Michael Bigger blogs frequently on APP at http://biggercapital.squarespace.com/  It's pretty ugly but has good possibilities for an 8 bagger by 2018.

 

Noteworthy Changes

New distribution center will cut costs.

Recently issued shares at 0.50 used to pay off debt interest and provide working capital moving forward.

New financing.

Reduced CEO control through share offering (this is a good thing with Dov).

Increased store productivity (management).

New third party sales (management).

~25% increase in store count by 2018 (management).

 

2013 net sales 633M.

 

By 2018 we could see 1B in net sales.  Management's goal is to have an EBITDA margin of 15%.  With an EBITDA margin of 10%, and assuming 200M share count we're looking at 0.50/share EBITDA.  Current share price is 0.50. 

 

With only 800M in sales and 10% EBITDA margin we still have 0.40/share EBITDA.

 

Anyone have a position or follow? 

[yader]

Here's a piece from FiveT who participated in the latest share purchase.

 

“It was a similar situation” to American Apparel, Roth said. Both companies “shouldn’t have traded that low.”

 

Source

http://www.bloomberg.com/news/print/2014-04-08/american-apparel-ceo-finds-new-believer-just-in-time.html

 

[ragnarisapirate]

Given the bk that's happening.... *bump*

[doughishere]

AMERICAN APPAREL: Files for Bankruptcy with Debt-for-Equity Plan

American Apparel, Inc., and five of its affiliates sought Chapter 11 bankruptcy protection in Delaware with $398 million in debt. The Debtors intend to continue their operations with as little disruption and loss of productivity as possible.

 

The bankruptcy filing did not come as a surprise. As early as 2011, the Company already warned of a potential bankruptcy when it included a "going concern" qualification with respect to its 2010 financials in its Form 10-K.

 

The embattled retailer lost more than $300 million from 2009 to 2014, court papers show. In 2014, American Apparel generated more than $600 million in net sales, according to the bankruptcy filing.

 

Late last year, the Company's former Chief Executive Officer Dov Charney was ousted by the Board over an alleged misappropriation of Company funds, sexual harassment, and other illicit and unlawful behavior. According to the Company, this conduct exposed it to millions of dollars of legal liabilities, an investigation by the SEC, an untold amount of financial harm, disruption to operations and significant negative publicity.

 

"After years of operating losses, mounting debt and poor leadership, the Company has in the past year replaced its management team, made new hires in key leadership positions and devised a comprehensive turnaround plan," said Mark Weinsten, chief restructuring officer of American Apparel. "Unfortunately, continuing and significant operating losses has left the Company with inadequate liquidity to implement its turnaround plan," he added.

 

To this end, the Company negotiated with its secured noteholders, which negotiations culminated with a restructuring support agreement and the plan of reorganization. The RSA is supported by the Prepetition secured Lenders and holders of more than 95% of the Senior Notes. Under the Plan, more than $200 million of Senior Notes would be converted into equity interests of the reorganized American Apparel. The Plan provides distributions to general unsecured creditors in the form of units in a litigation trust and, if the Plan is accepted by such class of creditors, a $1 million cash payment.

 

In connection with the Restructuring Support Agreement, the Supporting Parties committed to provide the Debtors with a $90 million in debtor-in-possession financing. The Supporting Parties have also agreed to convert the DIP Credit Facility into an Exit Term Loan and provide an additional $40 million of liquidity to

fund exit costs and capitalize the business.

 

"If confirmed, the Plan will result in a revitalized American Apparel with a significantly deleveraged balance sheet," Mr. Weinsten said. As of the Petition Date, the Debtors had outstanding long term debt in the aggregate principal amount of approximately $295 million. To enable the Debtors to minimize the adverse effects of their cases, they are requesting various types of relief in their first day pleadings. The Debtors are seeking authority to pay employee wages; pay critical vendor claims of up to $5 million; prohibit utility providers from discontinuing services; continue using existing cash management system; and continue to engage in certain marketing and sales practices. The Debtors and their non-debtor affiliates operate a vertically integrated manufacturing, distribution, and retail business focused on branded fashion-basic apparel, employing approximately 8,500 employees across six manufacturing facilities and approximately 230

retail stores in the U.S. and 17 other countries worldwide.

 

The Debtors have engaged Jones Day as restructuring counsel; Pachulski Stang Ziehl & Jones LLP as local counsel; Moelis & Company as investment banker; FTI Consulting, Inc. as financial advisors; DJM Real Estate as real estate consultant; and Garden City Group, LLC as claims, noticing and solicitation agent. The Debtors expect to emerge from bankruptcy within six months.

 

A copy of the declaration in support of the

First Day Motions is available for free at:

 

http://bankrupt.com/misc/3_AMERICAN_Affidavit.pdf

[doughishere]

Total Assets: $199,360,934 as of Oct. 4, 2015  Total Debts: $397,576,744 as of Oct. 4, 2015

 

The petition was signed by Hassan Natha, chief financial officer.

 

Consolidated List of Debtors' 30 Largest Unsecured Creditors:

 

Entity - Nature of Claim - Claim Amount

 

Standard General L.P. - Term Loan - $15,000,000

 

Standard General Master Fund L.P. - Term Loan - $9,865,000

 

Skadden, Arps, Slate - Legal Services - $3,833,878

 

Alameda Square Owner LLC - Landlord - $2,162,887

 

Dunaway Yarns, Inc. - Trade Debt - $2,029,208

 

Atalaya Asset Income -  Lease - $1,583,508

 

White & Case LLP - Legal Services - $1,425,538

 

Kuk II Spinning Co., Ltd. - Trade Debt - $1,409,632

 

Andari - Lease - $1,365,793

 

Utica Lease Co. - Lease  - $1,138,873

[doughishere]

I only did anything over 1M$

[doughishere]

American Apparel, Inc., et al., ask the Bankruptcy Court to enter an order granting them leave to file their joint plan of reorganization without concurrently filing an accompanying disclosure statement regarding the Plan.

 

The Debtors currently anticipate filing a Disclosure Statement in the near term, within 10 days of the Petition Date, as required by the terms of the restructuring support agreement entered into with the Supporting Parties on Oct. 4, 2015. In addition to preparing to file the Chapter 11 cases, which is a substantial and time-consuming effort in and of itself, the Debtors said they have had to devote significant efforts to, including, without limitation:

 

(i) negotiating, documenting, and implementing the RSA and several critical accompanying documents, including an equity commitment agreement and an exit facility term sheet;

 

(ii) negotiating, documenting, and implementing the Debtors'  debtor-in-possession financing, including the consideration of several proposals for such financing;

 

(iii) retaining necessary professional advisors critical to the  preparation of the Chapter 11 cases; and

 

(iv) coordinating the logistics of filing the Chapter 11 cases,  all of which was required to be done on a highly condensed time frame.

 

Nevertheless, the Debtors have been able to formulate the Plan, a copy of which is available for free at:

 

http://bankrupt.com/misc/21_AMERICAN_Plan.pdf

 

The Plan would:

 

* convert over $200 million of Senior Notes into equity interests of the reorganized American Apparel;

 

* provide the reorganized American Apparel with up to $40 million in committed exit capital from the Supporting Parties in the form of a minimum $10 million of equity capital pursuant to an equity commitment agreement and up to an additional $30 million under a exit credit facility; and

 

* provide distributions to general unsecured creditors in the form of units in a litigation trust and, if the Plan is accepted by such class of creditors, a $1 million cash payment.

[doughishere]

I wonder how Charney feels now about his deal with SG?

 

Should I keep posting these or just leave them?

[Haasje]

Please post. I can't find the senior notes. Do you happen to know the SIC? I'd like to know what they trade for.