Dive Brief:

• Lion Capital is calling in its $10 million loan to American Apparel for immediate repayment. The lender has always stipulated that it may do so if Dov Charney were to leave as CEO. Charney was ousted June 18. 

• The loan call could also trigger default on a $50 million Capital One loan if that bank similarly calls for repayment.

• The embattled retailer is in the midst of talks with investment firm Standard General, which essentially controls 43% of the company’s shares. It’s not clear, though, whether Standard General would repay the Lion Capital under more favorable terms for the retailer, which has recently said it might do.

Dive Insight:

American Apparel is encountering some choppy waters from its decision last month to oust CEO Dov Charney. Charney has fought back hard to regain some control, although he has ceded crucial power to hedge fund Standard General to that end.

If Lion Capital’s credit line can be repaid, it could ultimately be in the retailer’s favor, considering the hefty 20% interest the loan carries. Negotiations between the board are ongoing, but hardly easy, as it involves making major changes to the board as well as critical financial considerations.