American Apparel warns investors it is running out of money

The LA-based clothing company, which admitted it doesn’t have enough financing to keep operating for the next year, said it is exploring options such as refinancing, raising new capital and restructing debt.

The troubled retailer said it would fail to file its quarterly report for the three months to June 30 on time due to potential non-compliance of certain agreements for a revolving credit facility from its lender, Capital One.

In a Securities and Exchange Commission (SEC) filing, American Apparel said: “As of the date of this filing, substantial uncertainty exists as to the ultimate outcome of our discussions with Capital One and our other financial stakeholders, and there are no assurances that such efforts will result in any transaction or agreement, or that any such transaction or agreement, if proposed and/or implemented, will be successful.

“The Company does not currently expect that it will have sufficient financing commitments to meet funding requirements for the next twelve months without raising additional capital and/or entering into some other financing transaction or agreement, and there can be no assurances that it will be able to raise such additional capital or refinance its obligations. In addition, whether or not any such transactions or agreements were implemented or successful, the Company’s existing and any new investors could suffer substantial or total losses of their investment in its common stock.”

The retailer is being sued by founder and former chief executive Dov Charney who was sacked in December following allegations he had violated its sexual harrassment policy. Charney denies these charges.

The retailer estimated that it lost about $19m (£12.2m) in the quarter ended in June including $3.6m (£2.3m) in costs related to litigation.

Last month the US retailer American Apparel revealed it was axing stores and jobs as part of a $30m (£19.4m) cost-cutting initiative.

American Apparel has 239 stores in 20 countries.