DOWNTOWN LA: American Apparel employs thousands of workers in Los Angeles.
MANUFACTURING
Major Investor in American Apparel Commits to Keeping Manufacturing in Los Angeles
The largest investor in American Apparel has agreed to infuse the company with $25 million so the Los Angeles clothing maker can pay off a $10 million loan that is being called in.
Standard General, the New York hedge fund that now controls 43 percent of the stock with the company’s founder, Dov Charney, will loan the clothing maker the money. In return, American Apparel’s board of directors must be reshuffled to include a member representing Standard General.
As part of the deal, Standard General agreed to keep American Apparel’s production in Los Angeles. Also, Standard General and Charney agreed to certain standstill and voting limitations through the company’s 2015 annual meeting.
That means they will not acquire any more stock until then. It also limits their vote to no more than one-third of the company’s shares on any issue put to stockholders. Their remaining shares would be voted proportionately to the vote of other stockholders.
“This truly marks the beginning of an important new chapter in the American Apparel story,” said Allan Mayer, co-chairman of the clothing company’s board, in a statement. “With the support of Standard General, we are confident the company will finally be able to realize its true potential.”
Mayer and David Danziger, co-chairmen of the seven-member board, will remain in their posts. But the five other members will leave. The departing members will be replaced by two new directors chosen by both Standard General and the current board. Another three board members will be designated by Standard General. Charney will not be on the board.
Meanwhile, an investigation will continue into Charney’s alleged misconduct, which was not detailed by the board. The investigation will be overseen by a newly appointed independent board committee. Charney will serve as a paid strategic consultant until the investigation ends. Then the committee will decide whether Charney will resume his job as chief executive or an employee.
Standard General’s $25 million infusion will go to pay off a $10 million loan called in by Lion Capital, a London-based investment company.
The loan stated that if Charney is no longer the clothing company’s chief executive, then American Apparel is in default on the loan. American Apparel’s board voted in June to kick Charney out as chief executive and off the board for alleged misconduct.
