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While he fights off a flurry of sex-harassment charges, Dov Charney may face an even scarier kind of beast.
The famously randy CEO of American Apparel — who was accused this month of keeping a former employee as a sex slave — has been forced to pump cash into the struggling clothier as his relationship with key lender Lion Capital is growing more tense, sources said.
The racy retailer’s 42-year-old founder yesterday raised his stake in American Apparel to 54 percent from 51 percent as he shelled out $2 million to buy 1.8 million shares, securities filings revealed yesterday.
That’s partly because Lion — the British-based hedge fund that threw American Apparel an $83 million lifeline two years ago, saving it from bankruptcy — owns stock warrants that, if exercised, could dilute Charney’s equity stake to as low as 44 percent, according to securities filings.
For the moment, sources said Lion remains supportive of Charney and his efforts to turn around the company. Last week, the investment firm even backed Charney against his sex-harassment accusers and advised American Apparel “not to pay a single penny” to settle any allegations, according to one source.
In an interview with The Post yesterday, Lion Capital partner Lyndon Lea brushed off the idea that he and Charney have become adversaries.
“I’m supportive of Dov — he’s a creative visionary and has a fantastic knack for product,” he said.
Nevertheless, sources said Charney is digging into his own pockets to shore up the company’s balance sheet — as well as his majority ownership — as Lion loses patience with mounting losses and breached loan covenants.
Lea — a veteran of Goldman Sachs and KKR, whose past fashion successes have included a shrewd investment in shoemaker Jimmy Choo — noted that Charney has significantly beefed up the retailer’s management of late, most recently with the hire of retail veteran Marty Staff.
Still, one source said Lion is prodding Charney to relinquish his “control freak grip” on nearly every aspect of the company’s operations.
“The ideal scenario would be for Dov to stick to the creative stuff, and let other people run the rest of the business,” according to the source, pointing to the management structure of Polo Ralph Lauren as a model.
But the 42-year old CEO is still “a million miles away from getting on board with that idea,” the source added.
Charney declined to comment yesterday, but a source close to the executive said he’s funneling cash into American Apparel mainly to pay skyrocketing bills for cotton yarn, whose prices have more than doubled during the past few months.
“This shows confidence in the company’s outlook,” the source added, noting that the retail boss expects American Apparel will generate positive cash flow this year as its Los Angeles factory recovers from a federal immigration bust that sent 1,500 workers packing last summer and crippled efficiency.