American Apparel Inc. confirmed yesterday that investment firm Lion Capital has demanded repayment of a $10 million loan, asserting the casual clothing maker defaulted under their credit pact when Dov Charney ceased to be chief executive, the Wall Street Journal reported today. The company, which makes T-shirts, leggings and other casual clothes, said it disputes the lender's claims and may seek damages from Lion for what it deemed an invalid acceleration of the loan maturity. American Apparel added that its revolving credit pact doesn't permit the repayment of the loans from Lion, but it is seeking consent from those lenders to do so and believes it will be able to repay the loan if consent is given. The company, meanwhile, is in talks with hedge fund Standard General to shore up its finances, reconstitute its board and strengthen its management. The moves are aimed at resolving a crisis at the company that was set off last month when the board voted Charney out as chairman and told him he would be fired as president and CEO once a 30-day waiting period called for in his contract expired. Lion had the right to call in the loan if Charney was removed, but the company argued in yesterday’s regulatory filing that such a move couldn't be made before July 19.
