April 1, 2011 – (Reuters) - Floundering hipster brand American Apparel <APP.A> posted a loss of $86 million in 2010, and said it may have to file for bankruptcy protection if it did not manage to get enough funds to keep going, a filing dated March 31 said.
American Apparel, known for its "Made-in-USA" clothes, has been under fire on a lot of issues, ranging from possible covenant breaches and a long-running sales slump to immigration probes of its workers and sexual harassment cases against its chief executive.
The company, which swung to a full-year loss from a profit of $1.1 million in 2009, is exploring alternative sources for its ongoing cash needs and has engaged a financial advisory firm, the filing said.
In February, the company had said some lenders had extended a credit agreement, but a default could still jeopardize its ability to continue as a going concern.
The securities filing also said creditor Lion Capital's designated directors Lyndon Lea and Neil Richardson have resigned from the company's board "to allow Lion flexibility in evaluating its options to optimize its investment in American Apparel."
American Apparel's shares had closed at $0.96 on Thursday on the American Stock Exchange.
(Reporting by Nivedita Bhattacharjee in Bangalore; Editing by Saumyadeb Chakrabarty)