(Adds background on American Apparel, paragraphs 5-11)
By Jeffrey Dastin
July 7 Lion Capital has ordered American Apparel
to immediately repay a $10 million loan, after the
retailer failed to do so by a July 4 deadline, a source close to
the matter said on Monday.
The ousting of American Apparel Chief Executive Officer Dov
Charney more than two weeks ago prompted Lion Capital to demand
repayment of a loan that was originally due in 2018.
In an unrelated matter, a shareholder named Tammy Federman
sued Charney and American Apparel board members, saying they
failed to take appropriate, timely actions despite knowing about
Charney's misconduct, according to a case filed in a U.S.
district court in California on Monday.
A spokesperson for American Apparel declined to comment on
the Lion Capital loan and was not immediately available to
comment on the lawsuit. Federman's lawyer was not immediately
available for comment.
The embattled company had more than $250 million in debt at
the end of the first quarter, according to a company filing.
It has a $50 million credit line under the Capital One
Credit Facility containing "cross-default provisions" that could
be triggered by a default on the Lion Capital loan.
American Apparel suspended Charney on June 18, alleging he
misused company funds and helped spread nude photos of an
ex-employee. Charney's lawyer filed a request for arbitration
the following week in an effort to restore the 45-year-old
founder to his role as chief executive.
The company adopted a "poison pill" on June 27, effectively
halting stock acquisitions by Charney after he increased his
share holdings with the help of hedge fund Standard General to a
level approaching 43 percent.
The drama took an unusual twist when Charney handed over his
entire stake and voting rights to Standard General in part
because the American Apparel board refused to speak with Charney
directly. Now American Apparel is in talks with Standard General
to decide the retailer's future.
FiveT Capital, the retailer's second-largest shareholder,
sold the majority of its American Apparel stock in response to
the turmoil that faces the company, The New York Times reported
On Monday, American Apparel stock rose almost 2 percent to
close at about 88 cents, its highest since June 27. In early
January, the stock traded as high as $1.43.
(Reporting By Jeffrey Dastin; Editing by Marguerita Choy and