MANUFACTURING
American Apparel Board to be All Shook Up
The largest investor in American Apparel has agreed to infuse the company with $25 million so the Los Angeles clothing maker can pay off a $10 million loan that is being called in.
According to numerous news reports, Standard General, the New York hedge fund that now controls 43 percent of the stock with the company's founder, Dov Charney, will loan the clothing maker the money. In return, American Apparel's board of directors must be rejiggered to include a member representing Standard General.
Allan Mayer and David Danziger, co-chairmen of the seven-member board, would remain in.
On Monday, Lion Capital, the London-based investment company that loaned American Apparel $10 million, wants that money back after negotiations fell through.
The loan states that if Charney is no longer the clothing company's chief executive, then American Apparel is in default on the loan. American Apparel's board voted in June to kick Charney out as chief executive and off the board.
Meanwhile, Charney acquired a huge chunk of American Apparel’s stock with the help of Standard General, but the control of the company now rests with Standard General.
On June 27, with the help of Standard General, Charney bought 27.35 million shares of American Apparel stock for $19.55 million. The investment firm bought the stock and then, through a loan, turned it over to Charney. The five-year loan carries a 10 percent interest rate.
Standard General noted in documents filed with the Securities and Exchange Commission that it believes "American Apparel is a great company with a difficult corporate governance issue and a fragile capital structure."
