Growing debts threaten future of American Apparel
18 August 2010 10:31
There are genuine fears today that the future of US fashion chain American Apparel may be in jeopardy due to mounting debts and losses.
The retailer, which operates 280 stores - 14 of which are in the UK - announced that its debts had risen to $120.3 million (£77.2 million), with losses of up to $7m (£4.5m) for the three months to June. These losses are expected to continue into its third quarter of trading. More critically, however, American Apparel said it was likely to breach the terms of its agreement with its main lender, private equity firm Lion Capital, next month. As a result the company said that it "may not have sufficient liquidity necessary to sustain operations for the next twelve months."
"These factors, among others, raise substantial doubt that the company will be able to continue as a going concern," it said.
In recent years the company has been dogged by controversy. Last year US immigration inspectors ordered 1,500 American Apparel workers in Los Angeles to be dismissed because they lacked the correct work documents and in July the company's auditors Deloitte resigned.
Today the company's 10,000 employees can only wait and hope for a solution to its dire financial position to be found.
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