Ousted American Apparel CEO Dov Charney has found a backer in his bid to amass a controlling stake in the company.
New York investment firm Standard General LP has agreed to lend Charney money to enlarge his 27-percent equity stake in the retailer, according to a Friday securities filing.
If Standard General is able to buy at least 10 percent of the company’s shares, it will effectively hand control of those shares to Charney under a complex loan agreement, according to an amended 13-D filing with the Securities and Exchange Commission.
Insiders said Standard General appears to have already bought up 10 percent of the company and then some.
Indeed, Charney “may be close to having an effective majority in the shares” under the terms of his deal with Standard General, a source briefed on the situation said.
Earlier Friday, American Apparel shares surged 29 percent in regular trading on volume of 24.5 million shares — a daily turnover accounting for about 14 percent of the company’s outstanding stock.
Traders speculated that aggressive purchases by Standard General fueled Friday’s rally, as well as daily gains racked up since last Wednesday, which have left the stock 83 percent higher.
The loan from Standard General will bear an annual interest rate of 10 percent that’s guaranteed by Charney’s own equity stake, giving Charney an incentive to boost American Apparel’s languishing stock price.
On the other hand, both Charney and Standard General could be wiped out completely if American Apparel’s stock tanks, according to the terms of the deal.
As first reported by The Post last week, Charney is angling to gather a controlling stake in American Apparel in order to retake the helm of the board, which ousted him in a surprise coup last week.
Insiders said Charney may call for a special shareholder meeting to add enough directors to the board to give him a majority. Alternatively, Charney could demand a board shakeup, citing the written consent of his majority bloc, legal experts said.
Last week, five of American Apparel’s seven directors voted to suspend Charney as CEO and strip him of his chairman role.
Just minutes earlier, three of the five who voted against Charney had been re-elected to three-year terms at the company’s annual shareholder meeting.
If Charney and Standard General can obtain more than 50 percent of American Apparel’s stock, “it’s Dov’s to lose — he will be able to go back in,” said Randy Katz, a partner at law firm BakerHostetler.
Katz cautioned, however, that Charney could run into trouble if he tries to quash a board investigation into alleged misconduct, as it could raise shareholder concerns about legal liability.
Last week, the board’s probe found that Charney misappropriated funds and allowed a blogger to post nude photos to defame Irene Morales, a former employee who had alleged in 2011 that Charney made her his “sex slave.”