American Apparel nears default

The L.A.-based clothing manufacturer reported a first-quarter operating loss of $17.6 million as it tries to amend its $80-million loan agreement with Lion Capital. Needless to say, the stock is taking a bath this morning, down almost 27 percent, to below two bucks a share. American Apparel has a sleight-of-hand ownership structure (Lion Capital acts as lender and shareholder), so things may not be as bleak as they seem. But clearly this is not a model of solid management, starting with last year's government crackdown on 1,500 American Apparel workers who didn't have proper working papers.