Dov Charney Staring Down Chapter 11: American Apparel Still Facing Financial Woes
Although Dov Charney told Runnin' Scared recently that he has the full confidence of the board that bailed out his company last year, the New York Post reports otherwise today. "My assessment of Lion Capital is that they're a very good financial partner and they would not lose confidence in me personally as a result of fraudulent claims. They're perfectly able to make that assessment because there's intelligent leadership in that organization," Charney said. "We're faced with some challenges," he admitted. "But we have a great business and people love our product and we're having no trouble selling it." But according to the Post, a new $10 million equity infusion is being considered, leaving some board members worrying about Charney's role in the company.
More from the Post:
Sources said proposed terms of the financing are expected to dilute the company's current shareholders -- with the possible exception of Charney. That's because a proposed "earn-out" provision would give Charney, who is the company's majority shareholder, options to acquire additional shares if the stock appreciates in the future, according to one source.
The bigger concern among some directors, however, is that the deal could bolster Charney's position as he tries to reassert control over American Apparel's struggling stores.
"There are some who believe that [Charney] needs to give up financial control of the company," according to one source briefed on the board's recent deliberations. "You could say that Dov has a history of spending money like a drunken sailor."
Another $15 million could soon follow the initial $10 million, and Charney may be forced to put in more equity himself, in addition to the $1.8 million he added last month. As the challenges grow, you have to wonder when Charney just decides to cut and run, allowing himself to enjoy his sex, drugs and general debauchery in peace.
The thing is, if he's to believed, the business is his life. "This story's not over. I'm 42. I mean, Calvin Klein went from 300 million dollars in sales to 30, everyone thought he was over. Tommy Hilfiger had ups and downs. I'm 42 and everyone else is in their 60s," he insisted earlier this month. "There's nobody my age running a major apparel company. Nobody. I'm a stand-alone." No one's challenging that very last part.
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