Ever since the board of directors at American Apparel (APP) ousted Dov Charney, the founder, chief executive, and chairman, there have been almost daily reports of firms apparently angling to take over, sell off, or run the company. So you may be wondering who’s actually in charge. Good question. Right now it’s the board of directors, the same ones who pushed Charney out on June 18, and the company’s newest, largest investor, Standard General. That’s the hedge fund that bought up company shares on behalf of Charney; the deposed chief then last week gave the firm control of his 27 percent stake.
In a couple of days, Standard General will still be the biggest investor. But the board may be almost entirely different. The hedge fund and the company are working out an agreement that will, among other things, likely replace four of the six board members with retail experts. The two co-chairmen, Allan Mayer and David Danziger, could keep their positions to ensure the company maintains its manufacturing workforce in Los Angeles and continues to pay them higher than minimum wage.
Two board seats have been left empty for the past couple of years. They belong to Lion Capital, a British private equity firm that has loaned American Apparel money several times. The most recent loan—$10 million, with an interest rate of 20 percent—has been at risk of default since Charney was suspended. (Officially, the board has to wait 30 days before firing him as CEO.) Standard General may pay Lion so that American Apparel can avoid triggering other lenders to call their loans, someone familiar with the situation told Bloomberg News. No word yet on what would happen to those two board seats.
As for Charney’s position, Standard General has made no promises. Charney’s lawyer has called the board’s initial allegations baseless and has filed an arbitration petition to block his dismissal. Standard General is waiting for the results of a second investigation into his conduct by FTI Consulting before determining what, if any, role he will have. If no material wrongdoing is found, he could remain with the company, though perhaps not as CEO, the Wall Street Journal reported. But in a letter to investors, Standard General said Charney would serve no role if he is deemed unfit. Charney said of his situation: “I know that will be dealt with fairly later.”