Moody’s Investors Service on Wednesday cut American ApparelAPP 10.72 % ‘s rating one notch further into junk territory, citing a higher likelihood the company will default on its loans.
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A press release sent last week by the General Brotherhood of Workers of American Apparel announced that union leader Esmeralda Morales Bermudez, a 31-year-old mother of three from El Salvador, was fired for sending union-related emails during company hours.
Citing a regulatory filing, Reuters reported that the Los Angles-based retailer said it is negotiating with lender Capital One Business Credit Corp.to waive its non-compliance.
In a filing issued last Tuesday, American Apparel implied bankruptcy may be right around the corner if it is unable to recover from its worsening cash problem. “We believe that the likelihood of some sort of restructuring ahead of the upcoming October interest payment on the bonds is acute”, Moody’s Vice President Charlie O’Shea said in a statement. There can be no assurance that such waivers will be obtained on terms acceptable to the Company or at all, and the failure to obtain such waivers could have a material adverse effect on the Company’s financial condition and results of operations.
The company is facing a bond payment of $15.4 million in the fall, owes the government some $34 million, and legal bills of $3.6 million over its tussles with founder and ousted CEO Dov Charney aren’t helping.
However, the company now noted that it intends to file the second-quarter of 2015 Form 10-Q within 5 calendar days of its prescribed due date.
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Whether negotiations can be reached or not, it’s clear American Apparel’s next move will be a crucial one to its future. (NYSEMKT:APP)’s shares advanced 1.65% on Tuesday to end at $0.21. For the first half of 2015, revenue was down 14% to $259 million, while its net loss more than doubled to $45.8 million from $21.7 million a year earlier.
