Top 40 supplier American Apparel (asi/35297) has announced plans to appoint four new members to its board of directors, following a recent agreement with investment firm Standard General (www.standardgenerallp.com). As part of that deal, which provided American Apparel with $25 million in financing and gave Standard General a 44% stake in the California manufacturer, embattled CEO Dov Charney agreed to resign from his board position.
The newly-proposed directors are Radio Shack executive Joseph Magnacca, investor Thomas J. Sullivan, Standard General’s David Glazek, and Colleen B. Brown, the former CEO of Fisher Communication. Brown would become the first woman ever appointed to American Apparel’s board of directors. The board is poised to retain directors Allan Mayer and David Danziger, who in June drove an effort to suspend Charney for alleged misconduct.
“This slate of directors brings significant financial, retail and corporate turnaround expertise to the board,” Glazek said, in a statement.
According to SEC documents and media reports, Standard General selected two of the new directors, while two others were jointly chosen by American Apparel’s current board and the investment firm. Formally, the new directors were expected to be appointed in August. One empty board seat remains and Standard General could add a director to fill the void, per prior agreements between the parties involved.
In the midst of the July board announcement, Standard General, along with a special committee, continues to investigate Charney’s alleged behavior and will ultimately determine his future role in the apparel firm. Presently, Charney is serving as a paid American Apparel consultant. Mayer, Danziger and others on American Apparel’s board have accused Charney of misusing company funds and acting inappropriately toward employees, particularly women. Charney has maintained the board ousted him unfairly.
American Apparel’s deal with Standard General prevented the apparel company from potential default on a loan with Lion Capital. If American Apparel had defaulted, millions of dollars of other debt could have become due.