UPDATE 3-American Apparel says company not for sale

Mon Jun 23, 2014 1:53pm EDT

(Adds comments from co-chairman)

By Shailaja Sharma

June 23 (Reuters) - American Apparel Inc's co-chairman said on Monday the company was not for sale, had no need for immediate capital, and that the search for a new chief executive to replace ousted Dov Charney had generated "enormous interest."

The board of the hipster retail chain terminated Charney, the company's founder, as chairman and CEO last week, citing alleged misuse of corporate funds and his role in disseminating nude photos of an ex-employee who had sued him.

"We are certainly not looking to sell the company," Allan Mayer, the company's new co-chairman, told Reuters.

"If someone came and said they want to buy American Apparel for $10 per share, we'd be crazy to not listen ... but by no means (are we) looking to sell now," he said.

American Apparel's shares were trading at 67 cents on Monday afternoon, down 2.7 percent.

The stock rose as much as 5.4 percent in early trading after Charney said he wanted to talk to the company about shaking up its board and management.

Charney, the largest shareholder in the company with a 27.2 percent stake, said in a regulatory filing that he had been approached by "certain persons" who had expressed support for his continued leadership. (1.usa.gov/1iyOA2G)

Charney, who has a long history of allegations of misconduct and bizarre behavior - including appearing at a meeting in his underwear - said his supporters included stockholders.

"No idea who these supporters are," Mayer said.

FiveT Capital, which holds about 13 percent in American Apparel and is the largest shareholder after Charney, has indicated it does not support him, he said.

Mayer noted that American Apparel had hired investment banking advisory firm Peter J. Solomon Co to ensure adequate access to capital.

The company said last week that Charney's ouster could result in the 250-store chain breaching debt covenants.

"At this moment don't have need for additional capital," Mayer said. "But it is nice to have something in reserve if something unexpected happens."

American Apparel, which has reported losses in 16 of the past 17 quarters, had long-term debt of about $215 million as of March 31.

Mayer said the board expected to decide on a new CEO in the near future.

"We have been already given to understand that there are a number of really top people who would be interested in the job," he said. "It's going to be challenging job for the new CEO but good people are attracted to the most challenging jobs and this brand has so much power in it that it is a very attractive position. There is an enormous interest in this job."

John Luttrell, the company's chief financial officer, is acting as interim CEO.

Mayer said the board felt it was not worthwhile to engage in discussions with Charney "at this time."

"We had a long discussion last week at the board meeting and heard Dov out for quite a long time," he said.

"And we are satisfied that we understand his position and we are satisfied that we heard nothing that would cause us to rethink our decision."

Charney's lawyer has already sent a letter to American Apparel threatening legal action should 45-year-old Charney not regain his executive positions.

Montreal-born Charney said on Monday that he wanted to engage in discussions with the management and the board on matters related to board composition, management, operations, business, financial condition and strategic plans.

Shares of the company, known for its often racy billboard ads that feature scantily clad young women, have fallen 65 percent in the last 12 months. (Reporting by Shailaja Sharma in Bangalore; Editing by Sriraj Kalluvila and Ted Kerr)