Lion Capital sends letter to American Apparel urging it to explore options: source

A man walks past an American Apparel store in New York
(Reuters) – The board of American Apparel Inc (APP.A) has received a letter from British buyout firm Lion Capital, pushing it to explore strategic options include a sale, a source familiar with the situation said on Sunday.

The letter also said that Lion Capital would nominate Lyndon Lea, one of its founders, to the clothing retailer’s board of directors to replace one of its previous designees, Gene Montesano. Lion Capital, a former lender to the retailer, has the right to nominate two of American Apparel’s nine board seats. Lea had previously been on the board but stepped down in 2011.
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Lion Capital also has warrants to purchase up to 12 percent of the retailer.
The letter, which is being reviewed by the board, asks the board to form a special committee to evaluate options, according to the source, who asked not to be named because the matter is not public.
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Representatives for American Apparel and Lion Capital did not immediately respond to a request for comment.
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Irving Place Capital has put in a bid for the retailer for up to $1.40 a share, an offer that American Apparel’s board believes is far too low, Reuters has reported.
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The Los Angeles-based company has been bogged down by debt and investigations into the conduct of former chief executive Dov Charney that had dragged out for months. Charney was fired on Dec. 16 after a six-month suspension and will be replaced by Paula Schneider, president of ESP Group Ltd.
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The Wall Street Journal first reported the news about Lion Capital’s letter late Sunday.
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The Company that Dov Charney Founded
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Dov Charney (born January 31, 1969) is a Canadian businessman and the founder and former CEO of American Apparel, a clothing manufacturer, wholesaler, and retailer which he started at age 20.
He was involved in nearly every part of the business process from design and manufacturing to marketing.
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At American Apparel, Charney pioneered the Made in USA sweatshop-free model of fair wages and a refusal to outsource manufacturing. Charney has also been associated with several controversial lawsuits, including a $10 million lawsuit from film director Woody Allen and sexual harassment lawsuits involving ex-employees.In 2014 the issues resulting from some of these led to his dismissal as the company’s chief executive officer.

American Apparel CEO Fired After Investigation by NewsyVideos
The Los Angeles Times named him as one of the Top 100 powerful people in Southern California and in 2009, he was nominated as a Time 100 finalist by Time magazine.
Annie Hall billboard lawsuit
In May 2007, American Apparel posted two billboards in New York and Los Angeles featuring a still image of actor Woody Allen from his 1977 movie Annie Hall. They were removed at Allen’s request within a week; he subsequently sued American Apparel on various grounds (including rights to privacy, and property rights).
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According to Charney, the billboard, which featured a photo of Allen as an Orthodox rabbi and “cheeky” Yiddish text (“The High Rabbi”), was a commentary on the tabloid coverage he received from several unproven sexual harassment lawsuits and the way that he and Allen—both Jews—had been treated by the media.
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