Dov Charney is borrowing nearly $20 million to boost his stake in American Apparel Inc., giving him control of nearly 43 percent of the company’s stock.
But a legal morass awaits.
Charney owns the stock by virtue of a letter agreement with Standard General, which bought 27.4 million shares of the company for $19.6 million last week. According to a regulatory filing this morning, “Mr. Charney was obligated to purchase such shares of common stock and is deemed to be the beneficial owner of such shares.” The arrangement calls for Standard to lend Charney the money to buy the stake.
The deal would give more clout to Charney, who prior to that controlled 27.2 percent of the company.
But the board, which fired Charney as president, chief executive officer and chairman for misconduct, set up a stockholder rights plan over the weekend to prevent the ousted founder from regaining control of the company. The plan specifically noted that Charney would not be deemed beneficial owner of the shares Standard General bought by virtue of the letter alone.
That might leave Chaney in a tough spot — obliged to buy the shares from Standard, but unable to complete the deal without tripping the poison pill.
Regardless, Charney appears to be pushing ahead.
On Friday, he called for a special meeting of shareholders in September to increase the size of the board and make other changes.
Meanwhile, the board is continuing with its investigation into Charney, who has been sued repeatedly for sexual harassment and is said to have approved large severance payments to employees to shield himself from personal liability.