American Apparel Inc. (NYSEMKT:APP) Cash Problems May Force Delisting From NYSE

by James Karedelli | Thursday, Mar 27, 2014 | 1537 views

Boston, MA, 02/27/2014 (usastockreport) – Free cash flow depreciation has prompted branded retailer, American Apparel Inc. (NYSEMKT:APP), to carry out a share offering of its common stock to the general public, in a bid of raising $30.5 million. American Apparel plans to use proceeds from the offering for meeting its looming debt payments as well as for covering for expenses for its turnaround strategy.

Part of the offering’s proceeds will be used for covering interests on previously offered senior secured notes that are due next month. Underwriters have already been given a 30 day option for the purchase of additional $4.58 million shares. American Apparel’s market value currently stands at $83.4 million.

American Apparel’s cash woos

American Apparel Inc. (NYSEMKT:APP)’s cash problems begun in 2009 after being forced to sell some of its shares to founder and chief executive officer, Dov Charney. The recent cash crunch comes as a result of over borrowing that was carried out last year when the company was experiencing good improved sales.

American Apparel continues to grapple with a drop in sales this year and consequently showing no signs of improving. Share offering is turning to be the only remaining solution for the ailing company amidst interest payments of up to $13.5 million that are due in April.

Imminent Delisting Danger

Delisting from the NYSE has been mooted as a major setback that could befall the company in the coming days considering it has become extremely difficult for the company to meet its obligations with the ongoing financial woos. American Apparel has already submitted a turnaround plan on how it plans to go past its financial problems to the NYSE, awaiting response.

Delisting process will need to kick in, if the NYSE does not swim with the submitted turnaround plan. This is not the first time that American Apparel Inc. (NYSEMKT:APP) is facing delisting probabilities; back in 2010 it found itself in hot water after failing to submit its financial reports on time.

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