American Apparel has received a notice of default from its one of its lenders, Lion Capital.
The reason for the default is that Dov Charney has ceased to be chief executive officer of the company, according to a regulatory filing with the Securities and Exchange Commission today.
The agreement with Lion, dated, May 22, 2013, allows for the acceleration of the maturity of the loans and other outstanding obligations under the credit agreement. Lion initally loaned American Apparel $10 million.
American Apparel, in its SEC filing, disputed Lion's claim regarding Charney's position and said it is contesting the validity of the acceleration. American Apparel also reserved it rights against Lion for a claim of damages for asserting an invalid acceleration.
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