Ousted American Apparel chief executive officer Dov Charney has handed the voting rights of his stake in the struggling US retailer to a New York hedge fund he has allied with in his ongoing battle with the company's board, the FT's Elizabeth Paton writes.
After the board terminated his contract following allegations of financial mismanagement and sexual misconduct, Mr Charney, who says the allegations are false, has struck a deal with Standard General to allow the fund to negotiate directly with independent directors over the future of the business, people familiar with the matter said.
Last week, Standard General acquired a 17 per cent stake in American Apparel in a partnership apparently engineered to reinstate Mr Charney back onto the board of the company he founded in 1998. Mr Charney holds a 27 per cent stake, giving the bloc a combined stake of 43 per cent.
As part of the terms of their agreement, Mr Charney has relinquished the authority to make any control or decisions about American Apparel without Standard General's approval. Furthermore, the hedge fund has made no promises to the future of his role at the company, a source said.
According to people familiar with the matter, Standard General will act to counter Monarch Alternative Capital, American Apparel's leading bondholder, which is keen to close the brand's US manufacturing facilities, ship jobs overseas and put the company up for sale.
Standard General, a privately owned $1bn fund, has a track record of investing in distressed companies such as RadioShack.