American Apparel will have to pay a $10 million loan in full after the company’s request to stay out of default was denied, Bloomberg reported Friday.
A Bloomberg article citing unnamed sources reports creditor Lion Capital of London has denied American Apparel’s request to waive a default. Lion had the right to speed up repayment of the loan if there’s a change in management.
American Apparel, of Los Angeles, alerted investors that its move to suspend Chief Executive Dov Charney, pending termination for cause, could lead to a default of existing debts.
A default on the Lion Capital loan could lead to further difficulties for the downtown L.A. fashion company since that development could trigger cross-default provisions contained in the company’s $50 million line of credit with Capital One Financial Corp.