American Apparel – probably best known for those delightfully raunchy billboards you see in every major city in the United States and probably elsewhere, because this is the kind of thing we like to export – found itself darned close to filing Chapter 11 yesterday, less due to the fact that sex doesn’t sell sweatsocks (apparently it does) but more due to dropping a lot of cash on very aggressive expansion, as SOF was getting all “f*ck you, pay me” over their $51 mil credit line. (SOF is an affiliate of MSD Capital – which is controlled by Michael Dell. Picture him delivering that line to Dov Charney. Oh, what fun!)

Fortunately for aficionados and aficionadas of stretch knit jersey apparel and Dov Charney’s style of advertising, the UK’s Lion Capital was happy to step in with a $80 million cash infusion in return for an 18% stake, adding American Apparel to its portfolio of cod, vodka, razors and compote, so all is well:

According to Market Watch: “The company said it would use the proceeds from Lion Capital’s $80 million investment to retire its second-lien credit line with SOF Investments. The investment would come in the form of secured second-lien notes maturing in Dec. 31, 2013. A director and a partner at Lion Capital will join American Apparel’s board.”

Lazard Capital Analyst Todd Sanders told Market Watch that the free cash flow “generated by American Apparel over the next five years, even as it self-funds its own growth, should be more than enough to pay down all outstanding debt and allow for excess cash on the balance sheet. The company’s popularity spans a wide variety of cultures and attracts a well insulated, metro-centric demographic. The shares are highly attractive.”

This is the step the underpants gnomes were missing. 1) Steal underpants. 2) Start a factory where you turn them into lamé hotpants. 3) Profit! Just in case you were wondering what actually goes on in American Apparel’s factories, here’s a video. Probably NSFW, but with American Apparel, I really shouldn’t have to tell you that.