Ailing clothing chain American Apparel has received 25 million dollars, necessary to clear debt, from investment fund Standard General LP.
25 million dollar lifeline
The future looked grim for American Apparel, as the LA chain needed to pay back a 10 million dollar (7.5 million euro) loan to Lion Capital, but was unable to gather the funds. It also has more than 50 million dollars (37 million euro) in debt at Capital One and 210 million dollars (150 million euro) in bonds.
Standard General has now supplied a first lifeline worth 18.5 million euro, but the prerequisite is that American Apparel's board of directors gets re-arranged. Standard General already controls 44 % of American Apparel and can put three directors on the board while having a say about two other positions. Only co-presidents Allan Mayer and David Danziger can keep their spot on the board of 7.
Quid Dov Charney?
CEO Dov Charney, who has been suspended recently because of sexual harassment, has transferred his shares and voting rights to Standard General, which is remarkable to say the last. "A committee within the re-arranged board will decide Charney's American Apparel future", it has been said. The committee will have at least one Standard General board member and another jointly-appointed board member. Charney's investigation will last 30 days at most and until that time, Charney will stay on as "strategic consultant".
Once that situation has been dealt with, the challenge will be to get American Apparel back onto its feet: it has had a 270 million dollar (nearly 200 million euro) net loss since 2010. Its share went up 1.1 % on the NYSE when the deal with Standard General was revealed, but shares are still not even half of last year's level. That is taking into account the 30 % share value growth since Dov Charney's suspension.