American Apparel has disclosed the names of four new board members, including the first female director in the history of a company known for racy advertising.
The board shake-up is part of a deal with New York investment firm Standard General, which recently extended a $25-million financial lifeline to American Apparel.
Standard General controls a nearly 44% stake in the Los Angeles retailer through a cooperative buying arrangement with ousted Chief Executive Dov Charney.
The proposed directors include Radio Shack Chief Executive Joseph Magnacca and Thomas J. Sullivan, the managing partner of a financial advisory firm. The female director is Colleen B. Brown, who has previously served as the chief executive of media firm Fisher Communications. David Glazek, a partner at Standard General, will also join the board.
"This slate of directors brings significant financial, retail, and corporate turnaround expertise to the board," Glazek said in a statement.
Glazek said he will work with the board "to leverage the company's strong brand for the benefit of shareholders, creditors, employees, and the Los Angeles community."
As part of the agreement, Charney and four members of the board are resigning. Only David Danziger and Allan Mayer will remain; they took on the joint role of co-chairmen after Charney was voted out as chairman and suspended as CEO on June 18 for alleged misconduct.
Standard General chose two of the new directors, and two additional members were jointly chosen by the retailer's current board and the hedge fund. The investment firm can still choose another board member to fill the final empty board seat.
The directors, who will be appointed 10 days after the Wednesday announcement per government regulations, bring deep retail, media, financial and turnaround expertise to the troubled clothing manufacturer.
A special committee of the board will ultimately determine Charney's fate. He has agreed to keep working as a paid consultant for American Apparel pending the results of an investigation into his personal behavior.
The investigation carried out by FTI Consulting is ongoing. The company board cited many cases of misconduct when ousting Charney last month, including his alleged misuse of company funds and allowing the posting online of nude photos of a former employee who was suing him.
As part of the deal, Standard General agreed to provide up to $25 million in financial assistance to the beleaguered retailer company. Up to $15 million of that help remains after the investment firm bought a nearly $10-million loan that had been called in early from lender Lion Capital.
The deal saved American Apparel from a potential default on the Lion Capital loan. That could have triggered repayment demands on additional debts, including a $30-million loan from Capital One and $206 million in senior secured notes.
Standard General also plans to help the company improve operations, including investing more in e-commerce and expanding stores both domestically and internationally.
Standard General has said it is committed to America Apparel's made-in-the-U.S. model.