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American Apparel set to renegotiate debt covenants with UK lender

US retailer American Apparel is close to negotiating a debt revision with its UK backer, private equity group Lion Capital, according to reports.

The deal would prevent American Apparel breaching a debt covenant after the Los Angeles-based retailer said in May that it was having difficulty repaying its debts to Lion Capital.

According to Reuters, a source close to the situation said that after weeks of talks a deal to loosen the terms of the covenant was imminent.

American Apparel’s founder and chief executive Dov Charney has faced criticism from investors and analysts after American Apparel lost half its value following the announcement that it may breach a second-quarter covenant.

In March last year Lion Capital funded a last-minute $80m (£54.5m) loan at the height of the banking crisis.

Earlier this year Charney had said he was “elated” after another debt covenant was loosened by Lion. “I think we’re going to be fine in this area, in the area of covenants,” he said.  

In the three months to the end of March sales at American Apparel grew 6.6% to $121.8m (£83m).

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