Dive Brief:

• The ouster of American Apparel CEO Dov Charney by the company’s board has triggered a default on a $10 million loan that endangers the company’s liquidity.

• U.K. investment firm Lion Capital, whose loans have helped the retailer at crucial times in the past and which has been a Charney supporter, has denied a waiver of the default.

• Meanwhile, Bloomberg is reporting that the American Arbitration Association has notified the retailer that Charney is seeking arbitration to resolve his challenge to his firing. 

Dive Insight:

Lion Capital has been a supporter of Dov Charney in the past and has been a key source of financing at times when American Apparel has teetered on a financial brink. The investment firm’s move, which may be designed to give Charney some power in his dispute with the company he founded, puts the clothing retailer in a tight bind. The company has just recently flirted with bankruptcy and doesn’t have a lot of room to maneuver.