Canadian Yogurt King Saves American Apparel
Dov Charney‘s business is safe again — for now — thanks to a coalition of investors who managed to raise over $15 million to help American Apparel avoid defaulting on its loans. And the leader of that coalition is none other than a man who got his start selling frozen yogurt at a mall north of Toronto.
In the deal, Michael Serruya, who started the Yogen Früz franchise, and a group of investors bought $15.2 million worth of American Apparel shares, each sold for $.90. That price comes at a discount of just over 27 percent from where the stock closed yesterday at $1.24. The deal also includes an additional $27 million that can be converted into shares over the next six months. Lion Capital, the company’s largest investor, now holds warrants for another 32 million shares of the company.
WWD reports that it’s likely that that it’s likely that that money will likely be converted to shares, which will dilute Charney’s majority ownership in the company. But for Charney that risk seems worth it, and in exchange he’ll get to stay in business. As a result of this deal, American Apparel got a break on a $58.2 million debt covenant from Bank of America that might have come due at the end of the month. And considering how much the company lost last year, there’s no way it would have been able to pay.
Serruya and friends seem confident in their investment, and maybe their collective smarts can help steer American Apparel in the right financial direction. Serruya might not know fashion, but he does know business — he’s already bankrolling a few pretty big international operations as it is.
Serruya is a deep-pocketed investor who got his start as a frozen yogurt entrepreneur with a single Yogen Früz stand at the Promenade Mall north of Toronto, going on to co-found CoolBrands International Inc., which eventually operated nearly 5,000 franchises. More recently, Serruya made a big, winning bet on a Jamba Juice investment while its stock was severely depressed. He currently serves as a director of Swisher Hygiene Inc. and Response Genetics Inc.
This guy sounds like he knows what he’s doing. Maybe he can figure out a way to keep Dov out of legal trouble too?