RONKONKOMA, N.Y., July 1, 2013 /PRNewswire/ -- Lakeland Industries, Inc. (the "Company") (NASDAQ: LAKE), a leading global manufacturer of industrial protective clothing for industry, municipalities, healthcare and first responders on the federal, state and local levels, today announced the completion of financing transactions that combined a $15 million Senior Credit Facility with AloStar Business Credit, a division of AloStar Bank of Commerce, and a $3.5 million subordinated term loan, together with a warrant for common stock, with LKL Investments, LLC, an affiliate of Arenel Capital, a private equity fund.
Andy McGhee, President of AloStar Business Credit said, "We are pleased to support Lakeland Industries, Inc. as they restructure in order to move forward." AloStar Business Credit provides asset-based lending products nationwide to companies with financing needs up to $20 million.
The proceeds from such financing were used to fully repay the Company's former financing facility with TD Bank, N.A. in the amount of approximately US$13.7 million. Also repaid at closing was the warehouse loan in Canada with a balance of Cdn$1,362,000 Canadian dollars (approximately US$1,320,000), payable to Business Development Bank of Canada. Management believes that the conditions that were reported in its Form 10-K resulting in doubts about its ability to continue as a going concern have now been resolved as a result of the closing of this financing. The Company anticipates it will file an amended Form 10-K shortly.Christopher J. Ryan commented, "Since we have completed our refinancing of the TD Bank Credit Facility and alternately worked with the investment bank of Raymond James for a year considering all other possibilities, such as M&A transactions and financing alternatives, among many others, we can now focus much more on the turnaround currently being masked by the poor Brazilian results. My goal and top management's goal is to turn this Company around after having been hit by four significantly negative events all in a short time: the loss of the DuPont license, the huge judgment against the Company by a Brazilian Arbitration panel which management feels strongly did not fit the facts, the impending loss of the Company's line of credit with TD Bank and the loss of half of the Brazil subsidiary's sales an as indirect result of the arbitration judgment. The first three events have been dealt with successfully and the fourth we are about to address. "As we previously disclosed, the issues we had with Brazil directly and indirectly led to our violating covenants with our TD Bank loan agreement which caused a default. While TD Bank refrained from exercising any remedies it had, it continued to have the right to do so, as long as we were in default. Further, the loan facility with TD Bank was set to expire June 30, 2013. The Company, therefore, has been in a liquidity shortage as a result of these issues, leading to the going concern issues as raised in our Form 10-K report. We have dealt with some painful issues, but we believe the financing transactions we have just consummated are the best alternative we had and are in the long-term interest of the Company and our stockholders. As a result of a stabilized financing situation and the ongoing operating turnaround, we now expect to be in a stronger position to maximize shareholder value, whatever course it should take. "It should be noted that shareholder interests are paramount in our mind. The great majority of Lakeland's entire management team took a voluntary 8% cash pay cut immediately after the loss of the DuPont agreement in July 2011. In October 2012, top management, being the CEO, CFO and COO also took an additional 30% cash pay cut in return for restricted stock that does not vest for two years. In my experience you rarely see public company management do this. Additionally, the Board of Directors cut their compensation significantly in May of 2013. These actions were taken in the best interest of the Company and our stockholders. I believe the dilution involved with the issuance of the warrant in connection with the incurrence of subordinated debt is very manageable and allows a lender like this to make an investment in Lakeland. Management believes this is a favorable deal for stockholders' value in the long term, given the more dilutive offers made by all other parties talked to with similar investment goals in Lakeland over the last year."