Aug. 28 (Bloomberg) -- American Apparel Inc. investor Lion Capital LLP exercised its right to name a board member to the troubled retailer.
The London-based private-equity firm is choosing former food executive Robert Mintz, according to a filing today.
Lion, which agreed to sell a $10 million high-interest loan it had with American Apparel to Standard General LP in July, still has stock warrants equal to a 12 percent stake, allowing it to nominate two directors. The firm has been a long-time supporter of American Apparel founder Dov Charney, who was suspended as chief executive officer in June after the board accused him of misconduct.
Mintz would expand the board to eight members and be the sixth new director added since last month. He has more than 23 years of experience in the meat industry, including as CEO of barbecue-products seller Rupari Foods. The Wall Street Journal reported his planned appointment earlier.
American Apparel agreed to replace five directors as part of a pact with Standard General, which recently gained voting control of about 44 percent of the chain’s shares. That accord also entailed Standard General committing as much as $25 million in capital, some of which was used to buy the loan from Lion.
Lion has 24.5 million warrants with an exercise price of 66 cents. American Apparel shares fell 4.7 percent to about 94 cents at the close in New York today.
American Apparel’s net loss narrowed to $16.2 million in the quarter ended June 30 from a loss of $37.5 million a year earlier. The company has lost $290 million since the beginning of 2010.
A three-person subcommittee of the board, including two new members, will decide whether Charney will return to the company after it reviews the results of a third-party investigation into his conduct.
The board began the tussle for control of the chain when it suspended Charney in June with intent to terminate him for cause 30 days later.
His infractions are said to include violating the company’s sexual-harassment and anti-discrimination policies as well as misusing corporate funds by purchasing travel for family members and charging the company for personal expenses, according to a termination letter that was posted on BuzzFeed and verified by Bloomberg News.
The board said Charney failed to prevent an employee from creating a website that defamed a former worker, which led to an arbitrator finding that the company acted in malice.
Charney’s lawyer has called the accusations “baseless” and described his ouster as illegal.
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