American Apparel Inc. is pushing ahead with its search for a new chief executive officer, but still working through the ramifications of its ouster last week of president, ceo and chairman Dov Charney.
This story first appeared in the June 27, 2014 issue of WWD. Subscribe Today.
Allan Mayer, cochairman of the company, refuted a report that Lion Capital had demanded immediate repayment of its $10 million loan to the Los Angeles basics company.
“We’re still in talks with Lion,” Mayer told WWD late Thursday. “If they do decide to call the loan, we have access to the capital we need to pay it off so it’s not really an issue for us.”
Executives at Lion Capital declined comment.
American Apparel has a heavy debt load of about $280 million — an amount Mayer previously described as “embarrassing” — and some of that debt could also become due immediately if Lion calls its loan.
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While that sets up a potentially dangerous cascade, a source close to the company said that bankruptcy is “the furthest thing” from a worry at this point. That’s because, the source said, American Apparel is “very confident with its relationship with all its lenders.”
Mayer and the rest of the board suspended Charney with the intent to terminate his employment, alleging that the ceo “engaged in willful misconduct that has materially injured the financial condition and business reputation of the company.”
Charney was accused of not preventing an employee from “creating and maintaining false, defamatory and impersonating blog posts about former American Apparel employees” and of paying significant severance packages to former employees to shield himself from liability for misconduct.
The corner-office shake-up, which may have triggered a credit default, sent the company into discussions with its lenders.
Charney is contesting his termination at arbitration, and his lawyers are said to claim he is due $23 million to $25 million for unfair dismissal.
The turmoil has made for a busy time for American Apparel in the stock market. Shares of the company rose 9.4 percent to 74 cents Thursday, with about 40.9 million shares trading hands, more than 10 times the daily average for the past three months. That left the company with a market capitalization of $129.1 million.