Kim Was The Right Fit For American Apparel

When the drama surrounding American Apparel and its flamboyant founder, Dov Charney, began playing out earlier this year, Charney may have commanded the spotlight, but Soohyung Kim and his hedge fund Standard General quickly emerged as the key players.

Kim’s biggest moves so far have been in broadcast television, although largely behind the scenes. (See main story.) However, his activities to gain control of American Apparel generated some splashy business news. And that’s yielded a glimpse of a savvy hedge fund manager in action.

American Apparel and Charney had been in trouble as far back as 2010, well before Kim and Standard General got involved.

But when American Apparel’s board ousted Charney as CEO-president in mid-June, alleging misconduct including misuse of company funds and sexual harassment, Standard General jumped in and, in a cooperative buying agreement with Charney, acquired 44% voting control of American Apparel.

On July 9, Standard General, Charney and the company entered into a support agreement under which Standard General agreed to loan the company up to $25 million to help it avoid a looming loan default.

Without Standard General’s intervention, financially strapped American Apparel likely would have been unable to repay the loan. That, in turn, could have triggered demands for repayments totaling nearly $240 million from other lenders.


American Apparel has more than $250 million in debt and a market capitalization of only about $200 million, according to a July 23 Reuters story by Jeffrey Dastin.

The support agreement has a number of strings attached, further cementing Standard General’s control over American Apparel.

First, Standard General required that five of seven board members resign. Of the replacements, Standard General designates three; the two others are co-designated by Standard General and the American Apparel’s current board.

American Apparel recently named Joseph Magnacca, chief executive officer of the struggling retailer RadioShack, to its board. Standard General owns about 9.8% of RadioShack stock.

Among the board members Standard General tapped David Glazek, a Standard General partner; Thomas Sullivan, former CEO of New Young Broadcasting and a current Media General board member; and Colleen Brown, former Fisher Communications CEO.

The support agreement also calls for the two established board members, co-chairmen Allan Mayer and David Danziger, to remain. Danziger, along with one Standard General board designee and one joint designee, were named to form a “suitability committee” to investigate the allegations against Charney and determine whether it’s appropriate for him to be reinstated as CEO or take another executive position at the company.

Despite the initial cooperative buying agreement with Charney, Standard General has stated that its primary objective is to restore American Apparel’s credibility, as well as its financial health, and that it has no allegiance to Charney.

This story originally appeared in TVNewsCheck’s Executive Outlook, a quarterly print publication devoted to the future of broadcasting. Subscribe here.

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