Shares of Cherokee Inc. shot up more than 100 percent Monday after the Sherman Oaks-based apparel licensing company announced it has refinanced its debt with a $40 million loan.

The loan, which replaces Cherokee’s prior credit facility, increases the company’s overall liquidity by $5.5 million and raises its long-term debt from $45.2 million to $53.5 million. The loan is from Gordon Brothers Finance Co.

The refinancing comes after Cherokee acknowledged in a June earnings report it could face bankruptcy. The company, which conducts business as Cherokee Global Brands, stated it had substantial liquidity issues and may be unable to pay down its long-term debt, raising “significant doubt as to the ability of Cherokee Global Brands to continue as a going concern.”

Cherokee plans to use the financial flexibility to invest in its core licensing brands and streamline its business operations.

“Since the start of fiscal 2019, we have hit several benchmarks, including strengthening of our management team, successfully refining our operations and divesting non-royalty businesses,” said Cherokee Chief Executive Henry Stupp in a statement. “We are now better positioned to realize the full potential of our high-growth brand opportunities with the support of this more focused and efficient infrastructure.”

The company on Monday also said it issued new short-term notes to its subordinate lenders as well as warrants to purchase 2.8 million shares of its common stock to creditors at an average share price of 48 cents.

Cherokee (CHKE) stock rose 51 cents, or 112 percent, on Monday to close at 96 cents on the Nasdaq.