WSJ: American Apparel To Get $25 Mln In Financing

(RTTNews) - American Apparel Inc. (APP) has reached a preliminary agreement to get $25 million in financing from hedge fund Standard General in a deal aimed at shoring up the company's finances and reconstituting its board, the Wall Street Journal reported Wednesday, citing a person familiar with the matter.

The deal gives American Apparel funds to repay a $10 million loan from Lion Capital, which formally demanded repayment on Monday.

Standard General effectively controls more than 40% of the company's shares through an arrangement it reached last month with Dov Charney, American Apparel's ousted founder and chief executive. The hedge fund had said it planned to reconstitude the American Apparel board with a highly qualified slate of independent directors that will bring the requisite expertise in retail turnaround as well as institutional credibility.

American Apparel's board on June 18 voted to replace its founder Charney as chairman and plans to terminate his employment as president and CEO "for cause", amid ongoing investigation into his alleged misconduct. Charney's work contract requires a 30-day period before he can be terminated.

Allegations have been raised against Charney for misusing company funds and an ex-employee has sued him for posting her nude photos in a blog. Previously, several female employees had accused Charney of sexual harassment.

Standard General has said it is not endorsing or supporting Charney and that Charney has agreed that he will not serve on the board nor play any leadership role in the company until the investigation into his conduct is complete.