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American Apparel confirms default notice

Published on NewsOK Modified: July 8, 2014 at 12:47 pm •  Published: July 8, 2014
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NEW YORK (AP) — American Apparel Inc. has received a notice from investment firm Lion Capital demanding payment of a $9.9 million loan, according to a regulatory filing Tuesday.

Lion Capital is claiming that Los Angeles-based casual clothing chain defaulted under its credit agreement since it ousted its founder and CEO Dov Charney last month.

American Apparel said in the documents that it's disputing the claim, contesting the validity of the payment acceleration and has advised Lion that a default can't occur before July 19.

American Apparel's revolving credit line from other lenders doesn't currently allow the repayment of the Lion Capital loans. But American Apparel says it is seeking approval from those lenders and expects it will be able to repay the loan if that approval is granted.

On June, 18, the American Apparel's board fired Charney as chairman and suspended him as president and CEO. His contract requires a 30-day period before he can be terminated. The board cited "alleged misconduct."

In the meantime, American Apparel is in negotiations with investment firm Standard General to boost its finances and bring in new leadership.

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