New York -- American Apparel Inc. has reached an agreement with its largest shareholders that will bolster its financial situation, remake its board, and keep the retailer’s manufacturing in the United States.
The deal was struck by the New York investment firm Standard General, which owns a nearly 44% stake in the company, American Apparel’s board, and company founder Dov Charney. It includes up to $25 million from Standard General that will enable American Apparel to pay off a nearly $10-million loan from its longtime lender Lion Capital. On Monday, Lion formally demanded repayment of the loan, citing a provision in its lending agreement that allows the loan to be called in early if Charney stops working as CEO.
Under the agreement, five of American Apparel's seven directors have agreed to voluntarily step down, including Charney. Standard General will designate three new directors on its own and, along with the current board, will have a say in the other two candidates.
“This truly marks the beginning of an important new chapter in the American Apparel story,” Allan Mayer, a board co-chairman, said in a statement. “With the support of Standard General, we are confident the company will finally be able to realize its true potential.”
Under the new agreement, Charney will remain as a strategic consultant with the company until an investigation into his alleged misconduct is concluded. Based on the findings, a committee of board members will determine whether he can serve as “CEO or an officer or employee of American Apparel.”
"He will serve no role if he is deemed unfit," Standard General said in its letter.