BUSINESS

Former American Apparel lender urges retailer to look at 'strategic options'

Former American Apparel lender nominates new board member

Hedge fund Lion Capital has nominated one of its founders for a seat on the American Apparel Inc. board and is pushing the Los Angeles retailer to weigh "strategic alternatives," presumably including a sale of the company.

The London-based Lion Capital holds warrants to buy 12% of the clothier's stock, which allows it to nominate two directors. The hedge fund originally designated Lucky Brand Jeans co-founder Gene Montesano for a seat, but told American Apparel on Sunday it was switching to co-founder Lyndon Lea, according to a securities filing.

The hedge fund also asked the retailer to form a special committee to "evaluate" its options going forward and include Lea as a part of that group.

Those options could include a sale of the company. American Apparel said last week it had received a takeover offer from private equity firm Irving Place Capital, which was interested in bringing back former Chief Executive Dov Charney in some capacity.

The retailer has adopted a shareholder rights plan to ward off hostile takeovers. American Apparel is not interested in a sale, but hired investment bank Moelis & Co. to help evaluate any offers that come in, said a person close to the company.

Lion Capital, which was a former lender to American Apparel, continues to support Charney's return to the clothing company he founded, according to a person familiar with the matter.

The investment firm nominated food executive Robert Mintz, a childhood friend of Charney's, to the board this summer.

The switch in possible directors adds more drama to American Apparel, which is trying to forge a path forward after firing Charney amid allegations of inappropriate behavior, including misuse of company apartments and poor conduct with employees.

Last week, the retailer named Colleen B. Brown as chairwoman -- the first woman to lead the company's board. Paula Schneider, a longtime retail executive, was named American Apparel's first female CEO starting Jan. 5.

Shares of the company rose 2 cents, or 1.9%, to $1.08 on Monday.

Follow Shan Li on Twitter @ShanLi

Copyright © 2016, Los Angeles Times

UPDATE

4:42 p.m.: The post was updated to include the hiring of investment bank Moelis & Co.

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