How Close Is American Apparel to Closing Its Doors?

The apparel retailer has been reporting losses for the past five years, along with management turmoil.

Net sales fell about 17% to $134 million while sales at established stores fell 14% adjusting for currency fluctuations.

The retailer, which last year also delayed its second-quarter filings amid negotiations with its lenders, said it had identified potential violations of certain minimum financial ratios under its Capital One credit line as part of a customary review. “We believe that the likelihood of some sort of restructuring ahead of the upcoming October interest payment on the bonds is acute”, Moody’s Vice President Charlie O’Shea said in a statement.

American Apparel says it’s negotiating with Capital One regarding credit terms in an effort to right its ship, but things are looking quite dire and beyond any simple financial maneuvers.

Reuters said that Standard General LP sued American Apparel’s former chief last July for alleged failure to deliver on his promises to the hedge fund and has sought a court order to prevent Charney’s “destructive actions” against the firm. Nevertheless the corporate estimated that it misplaced about $19 million, or 11 cents per share, within the quarter led to June.

The retailer has to pay $13.9 million in interest, according to notes issued two years ago, while its market capital has dropped from $123.6 million at the end of Q1FY15, to current $25 million.

American Apparel Wednesday filed a report with the Securities and Exchange Commission indicating that it is “unable to file its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2015 (the “Q2 2015 Form 10-Q”) within the prescribed time period without unreasonable effort or expense …”

American Apparel noted that “substantial uncertainty” exists as to the ultimate outcome of its talks with Capital One and its other financial stakeholders. (NYSEMKT:APP)’s shares advanced 1.65% on Tuesday to end at $0.21.