The Latest: American Apparel Disputes Claim It Defaulted on $9.9M Loan

In What's New, Industry News by Accessories Staff

  • American Apparel's Mister and Miss Venice Beach

    American Apparel’s Mister and Miss Venice Beach

    Los Angeles—American Apparel today disputed a claim by Lion Capital that it had defaulted on a $9.9 million loan.The retailer, which ousted founder/CEO Dov Charney more than two weeks ago, said Lion Capital cannot demand repayment until Charney officially steps down after a month-long suspension on July 19, the filing said.

    Lion Capital, a British investment firm, said it had the right to recall the loan when American Apparel’s management changed.

    Lion Capital requested repayment after American Apparel said on June 18 it planned to terminate Charney for allegedly misusing company funds and helping spread nude photos of an ex-employee on the Internet.

    American Apparel also said in the filing it had the right to seek damages from Lion Capital “for asserting an invalid acceleration” of the date the loan was due in 2018.

    American Apparel declined to comment further and Lion Capital also hasn’t made a comment.

    The retailer said the terms of its credit line barred it from using the funds to pay back Lion Capital, but it was seeking an exception, according to the filing. If its request for the funds was rejected, however, there could be “a material adverse effect” on the company and its business, according to a report from Reuters.

    American Apparel is in talks with other sources that may help the retailer repay the loan, the retailer stated.

    Standard General, a hedge fund that acquired a 43% stake in American Apparel from Charney, could help the parties reach a deal. The retailer has also hired investment bank Peter J. Solomon to help it provide access to capital.

    If American Apparel fails to repay Lion, “cross-default provisions” in an agreement with another lender, Capital One, could be triggered, it had said in a previous filing.

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