(Corrects to add full name and affiliation of analyst in
By Jeffrey Dastin
June 27 Lion Capital has asked American Apparel
to repay a $10 million loan four years early after the retailer
ousted its founder and CEO Dov Charney on June 18, said a source
close to the matter Friday.
Allan Mayer, co-chairman of American Apparel's board, says
that talks with Lion Capital are ongoing "but if they do decide
to call the loan, we have sufficient capital to pay it off."
American Apparel shares rose 30 percent on Friday to close
at 97 cents on the American Stock Exchange, the highest level
"People are buying based upon the uncertainty we have right
now," said Eric Beder, an analyst who specializes in retail and
consumer products for Brean Capital. "I think Wall Street is
betting right now that Dov does not come back."
Lion Capital, a British investment firm that focuses on the
consumer sector, has made no public statement on the loan.
"Lion is either looking for an exit strategy, or it is
looking for Dov to come back," Beder said.
Beder said American Apparel does not have excess stores to
close and may need to issue more stock to pay its debt.
Failing to pay the loan to Lion Capital could trigger
default on a $50 million credit line with Capital One Financial
Corp, which "contains cross-default provisions," according to a
A spokesperson for Capital One did not immediately answer a
request for comment.
The New York Post first reported the news of the loan
In the meantime, the company faces a demand for arbitration
that Charney's lawyer filed Monday with the hope of restoring
Charney as the company's chief.
(Reporting by Jeffrey Dastin; Editing by Jilian Mincer and