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American Apparel sells stake

UK private equity firm Lion Capital invested US$80 million (£56.9m) in young fashion chain American Apparel last week.

The deal, which secured second lien notes which will mature on December 31 2013 with detachable warrants, will enable American Apparel to repay about US$51m (£36.6m) owed to lender SOF Investments. A repayment of US$16m (£11.3m) was due last week, but American Apparel had not been in a position to pay up until Lion Capital stepped in.

The remaining cash tied in with the deal will be used to fund working capital and reduce the balance of American Apparel’s revolving credit facility.
Lion Capital also received detachable warrants to purchase 16 million shares at US$2 (£1.42) each.

American Apparel chief executive and founder Dov Charney said: “This investment provides us with the long-term solution for our capital structure and an enhanced ability to grow our brand both domestically and internationally.”

Lion Capital partner Neil Richardson and director Jacob Capps will join American Apparel’s board.

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