American Apparel Amends Credit Deal, Seeks Resolution of E.E.O.C. Case

American Apparel, the Los Angeles–based vertically integrated retailer, announced an amendment to its credit agreement with a key lender, London-based Lion Capital, which will help it avoid a breach of covenant. The reworked credit deal eliminates a requirement that American Apparel earn a minimum operating income in 2010 as measured by its consolidated earnings before interest, taxes, depreciation and amortization (EBITDA). The deal, however, does stipulate that American Apparel must meet a minimum consolidated EBITDA covenant on a monthly basis in 2011.

In addition, the investor announced plans to work with Dov Charney, the company’s founder and chief executive, to hire several new senior executives to help manage the company.

“Lion Capital has enormous admiration for both American Apparel and its founder, Dov Charney,” said Lyndon Lea, founder and partner of Lion Capital, in a statement. “We are working together with Dov to realign the capital structure of American Apparel to support a number of key initiatives within the business, including the hiring of several new senior executives. ... We are particularly impressed by Dov’s passion and energy and have complete confidence in the American Apparel brand and its business model as an integrated manufacturer and retailer.”

In other American Apparel news, the U.S. Equal Employment Opportunity Commission, which enforces federal laws prohibiting employment discrimination, has filed a lawsuit against the manufacturer and retailer for allegedly violating federal law when it terminated a disabled garment worker who went on leave for cancer treatment. The suit, filed in U.S. District Court for the Central District of California, said the dismissed worker had filed for and received approval for medical leave in order to undergo chemotherapy but was let go when he returned to work after treatment.

The EEOC argues that by terminating him without exploring options for accommodation, American Apparel effectively denied the garment worker’s request for reasonable accommodation and fired him due to his disability, a direct violation of the Americans With Disabilities Act, a release from the commission states. The garment worker is asking for back pay, compensatory and punitive damages, and injunctive relief to prevent future disability discrimination.

“Employees have the right to seek and obtain a reasonable accommodation to modify their job, environment or schedule in order to continue working despite disability-related challenges,” said Anna Y. Park, regional attorney for the EEOC’s Los Angeles District Office, in a statement released by the EEOC.

Peter Schey, American Apparel’s attorney, said he had not been involved in an earlier attempt to settle the matter out of court. “I can’t comment on the circumstances and what took place,” he said. “However, American Apparel strongly supports the protections provided by the Americans With Disabilities Act, and it is the policy of the company to fully and enthusiastically [comply] with all the aspects of the act.” Schey said he hopes that the case will be resolved promptly and “in a manner that is fully consistent with the AWDA and with the rights of the claimant.” —Erin Barajas