American Apparel Inc. (NYSEMKT:APP) Stock Has Been Buffeted By Huge Headwinds

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Dallas, Texas 03/31/2014 (FINANCIALSTRENDS) – Move To Tap Market To Pay Back Debt Sinks The Stock American Apparel Inc. (NYSEMKT:APP) stock has been buffeted by huge headwinds ever since the firm announced that it is headed to the markets once more to raise close to $30.5 million from its secondary stock offering. The underwriters have been granted an option to buy out an additional $4.5 million worth shares in the 30 day period, in the event of over allotment of stock during the public offering.

This forced move on part of this $52 million market capped clothing chain has been linked to the crippling debt burden that the firm has boxed itself into over the past couple of years. The proceeds from the public offering of its stock, is proposed to be used to turn around the firm’s operational prospects, by retiring debt that is coming up for servicing and seeking more elbow room to get its sales efforts back in place.

The funds which are to be raised by the secondary public offering is to be used to pay back the interest component of its senior notes which are going to be due by end of April this year. The move to go back to the market to raise funds to manage its day to day operations, is not happening for the first time in American Apparel Inc. (NYSEMKT:APP) public trading history. Ever since it tapped the markets via its initial public offering in 2007, it has repeatedly sought to infuse funds into operations by divesting its shares with institutional investors and other private investors who are willing to still risk their capital on the loss making apparel chain.

Since the announcement last week, the stock has plummeted by nearly 38 percent, there by almost cutting by 1/3rd the firm is going through is being linked to sever mismanagement of the firms plan to move into a new distribution centre, which caused disruption in sales, which in turn led to huge fall in sales.

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