US clothing retailer American Apparel has struck a last-minute financing deal with its largest shareholder.
After a three-week battle over the future of the company, the struggling retailer agreed yesterday (July 9th) to remake its board and to try to shore up the company’s finances.
The agreement also includes a commitment to keeping manufacturing in the United States, the BBC reports.
Five of its seven board members, including company founder Dov Charney, will step down in return for an immediate loan of $25 million (£14.6 million) from hedge fund investor Standard General, with the money used to pay back creditor Lion Capital, which claims they defaulted on a $10 million loan.
According to a document filed with the Securities and Exchange Commission, an investigation that the current directors began into the conduct of Mr Charney, the company’s controversial founder, will continue.
The company's future was called into question after Mr Charney was pushed out of his role as American Apparel's chairman and chief executive officer for alleged misuse of corporate funds and sexual harassment.
FTI Consulting, the company in charge of the investigation, is reportedly expected to submit its findings by the end of the month.
Based on the inquiry’s findings, members of the new board will decide whether Mr Charney will be reinstated in the ranks of the company.
"This truly marks the beginning of an important new chapter in the American Apparel story," American Apparel co-chairman Allan Mayer said in a statement.
"With the support of Standard General, we are confident the company will finally be able to realise its true potential."
American Apparel has been unprofitable since 2010. Plagued by operational issues and management problems in its upper ranks, it lost $270 million in its last three fiscal years. Its stock, worth $15 at the end of 2007, traded below 50 cents this spring.
However, on Wednesday, the company’s stock gained more than five per cent in after-hours trading and today – as of 10.25 ET in New York – American Apparel Inc was up another 4.66 per cent to 0.8891.
Find up to date information on the FTSE 100 and spread betting strategies at City Index
GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.