Get breaking news alerts via email

Click here to manage your alerts
American Apparel facing large loan repayment
Retail » After ousting company founder, retailer’s board ask to repay $10 million loan.
First Published Jun 27 2014 11:49 am • Last Updated Jun 27 2014 11:49 am

The pressure is mounting at American Apparel, the retailer of U.S.-made clothing that fired its founder last week.

One of the company’s longtime lenders, Lion Capital, asked Thursday that a loan of about $10 million be repaid, according to a person familiar with the situation.

Join the Discussion
Post a Comment

The terms of the loan - which came with a 20 percent interest rate - said that if the founder, Dov Charney, ceased to be chief executive, the loan could be declared in default. Two people familiar with the negotiations said that the loan was not yet in default and that talks were continuing.

American Apparel, which announced this week that it had hired investment bank Peter J. Solomon, has indicated that if the Lion Capital loan comes due, it will be able to pay it off.

If the Lion Capital loan is declared in default, that could trigger the default of another company loan, with Capital One Business Credit Corp.

This move by Lion came just more than a week after the American Apparel board of directors shocked its founder by forcing him from the company’s helm. The board offered him the choice to leave quietly and stay on as a consultant, or else to be fired. Charney had been a controversial chief, accused several times of sexual harassment and sued by employees who said he had created an unsafe work environment rife with innuendo and sexual misconduct.

American Apparel did not tell Lion Capital that the move was coming, and the person with knowledge of the firm’s deliberations said it had been difficult to get its questions answered by the American Apparel board since Charney was pushed out.

American Apparel has struggled with high interest rates and a high debt burden, a sunken stock price, and management problems of late. But Allan Mayer, co-chairman of the board, has said that it was Charney’s conduct that led to his ouster, not the company’s financial performance, which has recently improved.

Charney’s lawyer, Patricia L. Glaser, has called the firing "illegal" and the claims against her client "baseless."

Copyright 2014 The Salt Lake Tribune. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Top Reader Comments Read All Comments Post a Comment
Click here to read all comments   Click here to post a comment

About Reader Comments

Reader comments on sltrib.com are the opinions of the writer, not The Salt Lake Tribune. We will delete comments containing obscenities, personal attacks and inappropriate or offensive remarks. Flagrant or repeat violators will be banned. If you see an objectionable comment, please alert us by clicking the arrow on the upper right side of the comment and selecting "Flag comment as inappropriate". If you've recently registered with Disqus or aren't seeing your comments immediately, you may need to verify your email address. To do so, visit disqus.com/account.
See more about comments here.
Staying Connected
Contests and Promotions
  • Search Obituaries
  • Place an Obituary

  • Search Cars
  • Search Homes
  • Search Jobs
  • Search Marketplace
  • Search Legal Notices

  • Other Services
  • Advertise With Us
  • Subscribe to the Newspaper
  • Access your e-Edition
  • Frequently Asked Questions
  • Contact a newsroom staff member
  • Access the Trib Archives
  • Privacy Policy
  • Missing your paper? Need to place your paper on vacation hold? For this and any other subscription related needs, click here or call 801.204.6100.