New York -- The American Apparel saga continues, with the beleaguered chain receiving a notice of default from its longtime lender, Lion Capital.
The default notice was based on the claim that founder Dov Charney ceased to be CEO of the company, according to a regulatory filing with the Securities and Exchange Commission today. (Lion had a stipulation in its loan agreement, which was signed last year, stating that if Charney left the company, it would be in default.)
The agreement with Lion, dated, May 22, 2013, allows for the acceleration of the maturity of the loans and other outstanding obligations under the credit agreement. Lion initially loaned American Apparel $10 million.
In its SEC filing, the retailer disputed Lion's claim regarding Charney's position and said it is contesting the validity of the acceleration. American Apparel also reserved it rights against Lion for a claim of damages for asserting an invalid acceleration.
In other developments, investment firm Standard General LP has reportedly taken control of the 43% ownership stake in American Apparel previously held by Charney., according to Reuters Although Charney previously said that he had signed a deal with Standard General whereby the firm would buy at least 10% of the company’s stock and then loan Charney the funds to acquire the stake, Standard General said this arrangement is not an endorsement of Charney.
While Charney retains the right to vote for a seat for himself on the American Apparel board of directors using his shares, Standard General said he has agreed not to do so. An SEC filing indicates Charney will give up his board seat until an investigation of the alleged improprieties that led to his dismissal is complete.