American Apparel has reached a deal in principle with shareholders to remake its board and bolster its finances, The New York Times reported Wednesday.
The retailer, hedge fund Standard General and suspended Chief Executive Dov Charney - who was ousted on June 18 for allegedly misusing corporate funds, among other accusations - have agreed to the terms of the deal, a source told the paper.
The pact will include $25 million from Standard General that would strengthen American Apparel's financial position and could be used to repay a $9.9 million loan from Lion Capital, the report said. Standard General had acquired, in recent weeks, a 43 percent stake in the company from Charney after American Apparel would not negotiate with him.
Charney's future role remains unclear. Only current co-chairmen David Danziger and Allan Mayer will remain on the board, according to the report.
Charney declined to comment. American Apparel, Standard General and Lion Capital were not immediately available for comment.
The deal could herald a period of calm for the company, which was making daily headlines as it raced to repay an almost $10 million loan from Lion Capital, which was originally not due until 2018.
The British investment firm had requested repayment after American Apparel said on June 18 that it planned to terminate Charney. On Tuesday, the company responded by saying Charney was merely suspended and would remain chief executive until July 19.
Failing to repay the loan could trigger a default on American Apparel's $50 million credit line with Capital One Business Credit Corp.
The stock was up about 2 percent to 85 cents in midday trading.
(Reporting by Jeffrey Dastin; Editing by Bernadette Baum)