Bloomberg

Floundering retailer American Apparel Inc. (NYSE: APP) can now add a potential New York Stock Exchange delisting to the company's heaping pile of problems.

The exchange warned the Los Angeles-based clothing and accessories chain that it doesn't meet continued listing standards because of the company's crumbling financial condition. American Apparel "has sustained losses which are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the Exchange, as to whether the company will be able to continue operations and/or meet its obligations are they mature," the NYSE said in a notice to the company on Sept. 23, according to a filing with the U.S. Securities and Exchange Commission.

To stay listed, American Apparel is supposed to submit a plan to the exchange by Oct. 9 addressing how it intends to regain compliance, which American Apparel says it is "in the process of preparing" – but warns "there can be no assurance that the company will be able to submit a plan that satisfactorily addresses the Exchange's identified deficiencies and concerns in the notice, if at all," in an SEC filing.

American Apparel has a $13.9 million interest payment due Oct. 15, and had $11.2 million in cash on hand as of Aug. 11, SEC filings show. In the company's latest quarterly filing it concedes it may not have enough cash to stay in business for the next 12 months, raising doubts about American Apparel's ability to continue as a going concern, or without the threat of liquidation.

The company is in the midst of a turnaround that includes store closures, apparel updates and a modified loan (for more, see American Apparel Expresses Self Doubt in SEC Filing, as Cash Dwindles), but it remains to be seen if the retailer can skirt a Chapter 11 filing, and reports in late August indicated the company was in talks with potential bankruptcy advisers.

While the company restructures, it also faces lawsuits from founder Dov Charney, who was ousted (twice) in 2014, amid allegations of behavioral misconduct. Charney was removed from his post initially in June, and permanently in December. The final decision came after Charney handed his voting power to hedge fund and American Apparel stakeholder Standard General (which owns less than 1 percent of the company) in exchange for an internal conduct review that ended in his termination. American Apparel declined to comment beyond SEC filings, and Standard General declined to comment for this story.

That process also overlapped with the company’s fielding of a potential buyout offering from New York private equity firm Irving Place Capital.

Overall, American Apparel has struggled during the past year. In the second quarter the business posted a year-over-year sales decline of 17.4 percent because it didn’t have enough new products to sell, it said. Net sales in the second quarter were about $134.4 million, compared with $162.4 million for the second quarter of 2014, SEC filings show.

After violating covenants, American Apparel amended its loan – changing lenders from Capital One Business Credit Corp. to a syndicate that includes creditors Standard General, Monarch Alternative Capital LP, Coliseum Capital LLC and Goldman Sachs Asset Management, with Wilmington Trust NA as administrative agent. The move also increased the loan from $50 million to $90 million.

For more on American Apparel and the struggles that other retailers are facing, see American Apparel's Turnaround Try Highlights Burden of Real Estate.

For the previous edition of Turnaround Tuesday, see Troubled Telecom Business NetTalk Adds Lawsuit to List of Problems. For a list of struggling businesses, check out Mergers & Acquisitions' Distressed Company Watch List

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