July 23 American Apparel Inc, a U.S. retailer dealing with high debt and management upheaval, said on Wednesday that the chief executive of another money-losing retailer would join its reshuffled board.
American Apparel appointed RadioShack Corp CEO Joseph Magnacca to its six-member board of directors, according to a company filing. The retailer, which for years aired racy ads and battled sexual harassment lawsuits, also named a woman to its board, former Fisher Communications Inc CEO Colleen Brown, and dropped its founder, Dov Charney, from the board.
American Apparel has more than $250 million in debt although its market capitalization amounts only to $200 million. RadioShack, which has reported losses for the past three years, faces a tough road ahead, too.
An agreement with hedge fund Standard General, which holds a nearly 44 percent stake in American Apparel and has promised the company $25 million of support, led the retailer to reconstitute its board.
The terms permitted Standard General to nominate three of the new directors, one with ties to the fund. It named David Glazek, a Standard General partner.
Glazek said in an email Wednesday, "This slate of directors brings significant financial, retail and corporate turnaround expertise to the board."
Standard General owns about 9.8 percent of RadioShack stock, which has fallen about 68 percent this year. It also owns about 30 percent of Media General Inc stock, and the hedge fund's chief executive serves on Media General's board. Thomas Sullivan, the fourth new addition to American Apparel, also serves on Media General's board.
The co-chairmen of the previous board, Allan Mayer and David Danziger, will stay on the new American Apparel board.
These two men played a role in the suspension of Charney on June 18 for allegedly misusing corporate funds and helping spread nude photos of a former employee.
A special committee of the board hopes to decide Charney's future with the company by mid-August, based on the findings of FTI Consulting, which is investigating Charney's conduct.
American Apparel stock closed at $1.09 on Wednesday. (Reporting By Jeffrey Dastin; Editing By Jilian Mincer, Toni Reinhold and Steve Orlofsky)