American Apparel Under Attack As Dov Charney Borrows To Increase Stake
American Apparel is in shambles, and there's a brewing war over the pieces.
Newly ousted CEO Dov Charney is raising the stakes in this boardroom battle. An SEC filing on Monday showed that Charney, recently fired from the company he founded 16 years ago, has bought nearly $20 million worth of American Apparel stock. That brings his total ownership to 43%, up from 27%.
In order to buy the 27 million shares, Charney entered into a loan agreement with Standard General LP. Charney needs the hedge fund's money to attempt a last ditch takeover attempt. He now needs to convince at least another 7% of the company's stockholders to side with him.
Investors don't seem to want Charney back, though. American Apparel shares are down about 6% on the news, after surging 20% when he was fired on June 19.
American Apparel has already instituted a poison pill which should prevent Charney from acquiring more shares on top of his most recent Standard General-assisted purchase.
But they may have a bigger problem on their hands first: the retailer's creditors are calling. Lion Capital is reportedly demanding repayment of a $10 million loan, and Capital One holds another $50 million credit line with American Apparel that could default as a result.
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