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American Apparel raises going concern doubts

People walk past an American Apparel store in New York City.
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People walk past an American Apparel store in New York City.

Troubled teen retailer American Apparel on Monday raised going concern doubts, saying it may not have enough capital to sustain operations for the next 12 months as losses widened and cash flows turned negative.

As of August 11, the company had about $11.2 million in cash, it said in a regulatory filing on Monday.

The company also said net loss widened to $19.4 million, or 11 cents per share, in the second quarter ended June 30, from $16.2 million, or 9 cents per share, a year earlier.

Sales fell 17 percent to $134.4 million.

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American Apparel said last week it doesn't expect to have sufficient funds to keep the business running for the next 12 months, and warned shareholders may lose some or all of their investments.

The company on Monday said it had breached covenants related to a credit facility with Capital One Business Credit Corp as of June 30.

Capital One handed over the credit facility to a syndicate of lenders that includes Standard General and had been replaced as a lender by Wilmington Trust, National Association on August 17, American Apparel said.

It said the covenant violations were waived under the new credit facility with Wilmington Trust.