content

American Apparel raises going concern warning as losses deepen

Embattled clothing retailer American Apparel issued a going concern warning on Monday, stating once again that it may not have enough liquidity to continue its operations for the next 12 months amid deepening losses and negative cash flows.

American Apparel said in an SEC filing after yesterday’s close that it had reached an agreement with a group of lenders, led by Standard General, to replace its $50 million credit facility with a $90 million asset-based revolver, maturing April 4, 2018. Wilmington Trust replaces Capital One as the administrative agent, the filing said.

Despite the cash infusion, American Apparel further warned that if it is unsuccessful in addressing its near-term liquidity needs or in adequately restructuring its obligations outside of court, it “may need to seek protection from creditors in a proceeding under Title 11” of the US bankruptcy code.

Note the company has a $13 million interest payment on its 15% first-lien 2020 bonds in October.

Shares in the name fell 4% to 14 cents as at mid-morning on Tuesday, having lost more than 85% this year.

As reported, American Apparel said it had been in ongoing discussions with Capital One regarding a potential waiver in an effort to avoid a potential default, and as a result of these discussions, was unable to file its second quarter 2015 10-Q filing before the regulatory deadline.

According to yesterday’s filing, the company was not in compliance with the minimum fixed charge coverage ratio and the minimum adjusted EBITDA covenants under the Capital One Credit Facility. For the April 1, 2015 through June 30, 2015 covenant reference period, its coverage ratio was 0.07 to 1.00 as compared with the covenant minimum of 0.33 to 1.00, and its adjusted EBITDA was $4,110 compared with the covenant minimum of $7,350. The covenant violations were waived under the Wilmington Trust Credit Facility.

The retailer on Monday confirmed its second-quarter results, released on a preliminary basis last week. As reported, second-quarter net losses jumped 20% to $19.4 million, or $0.11 per share, from a loss of $16.2 million, or $0.09 per share in the year-ago period. This is the company’s 10th consecutive quarterly loss.

Revenue fell approximately 17% from the year-ago period, to $134 million.

Adjusted EBITDA for the three months ended June 30, 2015 was $4.1 million, versus $15.9 million for the same period in 2014. As of Aug. 11, 2015, American Apparel had $11,207 in cash.

As reported, the company said it has begun discussions to analyze “potential strategic alternatives,” which may include refinancing or new capital raising transactions, amendments to or restructuring of its existing debt, or other restructuring and recapitalization transactions.

American Apparel is rated CCC- by Standard & Poor’s, with negative outlook. Its 13% senior secured notes due 2020 are rated CC, with a recovery rating of 5. Moody’s last week downgraded the company to Caa3 from Caa2, and placed the company under review for downgrade. – Rachelle Kakouris

content

ICG taps Goodman for U.S. private debt investment team

Intermediate Capital Group announced today that it has added Adam Goodman to its U.S. private debt investment team as a managing director, according to the firm.

Goodman joins from MetLife where he was head of mezzanine investments and a portfolio manager responsible for direct private debt, mezzanine, and credit fund investments. Prior to that he was at Allied Capital where he sourced, structured, and executed investments across the capital structure.

Goodman joins an existing U.S. investment team that includes Salvatore Gentile, head of U.S. Operations, as well as Brian Spenner and Seth Katzenstein, who both joined the firm in 2013. In all, the U.S. credit platform has 27 employees and manages $2.7 billion across its private and syndicated debt strategies, according to the firm. – Staff Reports

content

Ares Management announces merger plan with Kayne Anderson

Alternative asset manager Ares Management announced today that it is merging with energy specialist Kayne Anderson Capital Advisors. The combination will be renamed Ares Kayne Management. The firms had a combined $113 billion of assets under management as of March 31.

Total consideration is $2.55 billion. Ares plans to pay around $1.8 billion with partnership units and the $750 million balance in cash, which will be funded with new debt, according to a presentation. The deal is expected to close around Jan. 1, 2016, subject to regulatory approvals.

The combined business will invest across five groups: tradable credit, direct lending, energy, private equity, and real estate. However, the two companies will continue to manage their existing funds and operate under existing brand names, according to a statement.

Ares Kayne will have roughly 450 investment professionals in more than 20 offices globally. Kayne Anderson alone has around 110 investment professionals in eight U.S. offices managing investments in energy and energy infrastructure, specialty real estate, middle market credit and growth private equity. Substantially all non-energy personnel will join Ares’ existing private equity, real estate,and direct lending groups, the firms said.

Both Richard Kayne, the founder and chairman of Kayne Anderson, and Ares chairman and CEO Tony Ressler will serve as co-chairmen of the new entity. Kayne’s president and CEO Robert Sinnott will become chairman of a newly formed energy group at Ares Kayne. Sinnott and Kayne’s Kevin McCarthy will join the board. Sinnott, McCarthy, and Al Rabil will join the management committee. Ressler, Michael Arougheti, and Michael McFerran will remain in their respective roles as CEO, President, and CFO. – Jon Hemingway

content

Tikehau hires Goold for European CLO business

Alison Goold has joined Tikehau as a portfolio manager in its European CLO business. In this new position, Goold will report to Debra Anderson, head of the CLO department.

Goold joins from BNP Paribas, where she had been a director in the leveraged syndications team. Previously she had been head of corporate credit and a portfolio manager at AgFe, an independent advisory and asset management firm, and before that was a managing partner at mezzanine fund manager Carta Capital.

Tikehau recently priced its debut €354.7 million CLO through Goldman Sachs. – Nina Flitman

content

Carlyle hires Wight for middle-market operations role

The Carlyle Group has hired Jill R. Wight for a newly created operations role focusing on the firm’s middle-market portfolio.

She joins Carlyle as a principal, based in New York. Wight’s experience ranges from company oversight to executive development.

Previously, Wight was a director in the special situations group at Goldman Sachs, where she had been since 2008.

Prior to that, Wight was a vice president at GSC Group’s equity and distressed investing group where she led portfolio operations. She also worked at Bain & Company and Marakon Associates.

Carlyle is investing in middle-market companies from the two funds: Carlyle U.S. Equity Opportunity Fund, L.P. I & II. Investments include Service King, ECi Software Solutions, Traxys Group, AxleTech International Holdings, and PrimeSport. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, BDCs, distressed debt, private equity, and more.

content

Credit Value Partners expands middle-market lending with two hires

Credit Value Partners has expanded its middle-market loan origination team with two new hires from Metis Commercial Finance.

James Irwin had previously been CEO of Metis Commercial Finance. He was the founder of Metis. He previously held senior positions at Meridian Healthcare Finance and MC Healthcare Finance.

Daniel O’Rourke had been executive vice president and chief credit officer at Metis. He also worked at Salus Capital Partners and NewAlliance Commercial Finance.

The pair will focus on specialized loan origination and other direct lending opportunities, including asset-based loans, cash flow loans, and structured transactions.

Credit Value Partners makes loans of $5-50 million to U.S. middle market companies.

Metis Commercial Finance has offices in San Diego and Boston and is a non-bank direct lender to lower middle-market companies. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, BDCs, distressed debt, private equity, and more.

content

SunTrust adds Cecil Brown to corporate banking team

Cecil Brown has joined SunTrust Robinson Humphrey as a Managing Director with the West and Southwest Corporate Banking team. He will be based in Los Angeles and will report to Keith Roberts, head of Corporate and Commercial Syndicated & Leveraged Finance.

Brown was previously at GE Capital in Los Angeles, where he originated middle-market leveraged loans across industries. Prior to GE Capital, Brown worked for five years in restructuring and debt capital markets at Evercore Partners. Prior to that, he was a Managing Director in leveraged finance at Bear Stearns.

“The hiring of Cecil further exemplifies STRH’s commitment to attract and retain the best bankers as we continue to grow and capture an increasing share of mind from our clients,” said Chris Wood, head of Syndicated & Leveraged Finance at SunTrust. “Cecil’s experience is representative of the broad product solution set that we provide to our corporate and sponsor clients. We are excited about this addition to our platform.” – Staff reports

content

Capital Southwest hires Weinstein for middle market lending

Capital Southwest Corporation hired Josh Weinstein to source and underwrite for direct-lending and middle-market syndicated credits.

He joins as a principal on the investment team. He will be based in Dallas.

Weinstein previously worked at H.I.G. WhiteHorse, where he sourced and structured middle-market credits across industries for several credit platforms, including a publicly traded BDC. He also worked at Morgan Stanley and Citigroup.

Dallas-based Capital Southwest is a BDC that invests in controlling and minority stakes of private companies. Its shares trade on Nasdaq under the ticker symbol CSWC. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, BDCs, distressed debt, private equity, and more.

content

Hayfin Capital Management hires Moravek for U.K. origination

Private debt fund manager Hayfin Capital Management has hired Paul Moravek as a managing director in its U.K. origination team.

Moravek, who begins work at the firm next week, joins from VentureFounders, a U.K.-based equity crowdfunding platform which he co-founded in 2013.

Previously he worked in leveraged finance at Merrill Lynch for nine years, having joined in 2004 from J.P. Morgan.

Hayfin recently bid farewell to two managing directors: Paul Levy, who joined investment banking boutique GreensLedge, andRinaldo Olivari, who left to launch his own financial technology firm.

Jeff Sockwell, also a managing director and co-head of origination at the firm had earlier left the firm in May to the U.S. He continues to be an advisor to the firm.

The moves follow a recapitalisation at Hayfin whereby the firm sold the portfolio of owned assets to Australian sovereign wealth fund The Future Fund, one of its shareholders. Proceeds from the €705 million sale were used to fund a dividend to investors. In a statement at the time of the deal in May, Hayfin said it would continue to manage the assets on behalf of The Future Fund alongside other third-party funds and separate accounts. Hayfin reaffirmed its commitment to its role as a European direct lending platform and said it would look to expand it across Europe.

The firm’s management team increased their stake in the business following the recap, while the firm’s institutional backers – private equity group Towerbrook Capital Partners, The Public Sector Pension Investment Board, The Ontario Municipal Employees Retirement System (OMERS), and The Future Fund – reduced their shareholdings pro-rata. – Oliver Smiddy

content

Fifth Street Finance sells healthcare direct lender to rival MidCap

Fifth Street Finance Corp. has sold Healthcare Finance Group (HFG) to MidCap Financial, a competitor to HFG in direct lending to the healthcare industry.

“We decided that it was important to refocus FSC on our core lending businesses, particularly middle market sponsor-backed lending as well as technology lending and aircraft leasing,” a Fifth Street Finance Corp. statement today said.

HFG provided asset-backed lending and term loan products to healthcare companies.

As of March 31, HFG was the largest holding of FSC’s portfolio, accounting for 4.3%. The HFG investment totaled $118 million at fair value. HFG is an operating company with a portfolio consisting of individual loans to some 40 companies.

FSC acquired HFG in June 2013.

Fifth Street Finance Corp. is a business-development company that trades on NASDAQ as FSC. It is managed by Fifth Street Management. – Abby Latour

Follow Abby on Twitter @abbynyhk for middle-market deals, leveraged M&A, distressed debt, private equity, and more