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The Hedge Fund Manager Working With Dov Charney Loves A Lost Cause
Alana Kakoyiannis/Business Insider Video
Ousted American Apparel CEO Dov Charney has handed over his shares of the retailer to a hedge fund manager with a love for hopeless-looking causes, Soohyung Kim, founder of Standard General.
The fund has made investments in things like a defunct amusement park in Westchester County, New York _ where it sank $400,00, and RadioShack.
What makes American Apparel so "lost" is that it's a company in the midst of a war with its own founder. Last week it fired Dov Charney, allegedly for lude sexual conduct.
That aside, the company is sidled with debt from Charney's mismanagement. Its stock has fallen 54% in the last year.
Now that Standard General owns 43% of American Apparel it could wage quite the activist war if it so chooses. The company, for its part, has said that it's willing to at least talk to the hedge fund about corporate governance structure and its financial situation.
Those discussions may not mean that Charney gets his company back, though, as Dan Primack of Fortune reports:
Standard General’s American Apparel investment is essentially a loan to former CEO Charney, who was recently ousted by the board. Charney is trying to get his job back.
Last week, Standard General spent roughly $19.6 million to buy 10% of the outstanding shares of American Apparel. But it didn’t hold onto the stock. Standard General lent Charney $15 million, which he used to buy the shares that the hedge fund bought. It is charging Charney a 10% annual interest rate for the loan, with the right to take back the shares if Charney doesn’t pay. The hedge fund also got a warrant to buy back the shares, plus another nearly 5 million shares that Charney already owned, at last week’s stock price. So Standard will benefit if American Apparel’s stock goes up, if Charney rejoins the company or not.
The question is whether or not American Apparel stock will go up given the circumstances.
Kim founded Standard General in 2007 and holds a Bachelors from Princeton. After graduating, he worked as an analyst at Bankers Trust. He then cut his hedge fund teeth at Och-Ziff Capital Management, where he helped launch their fixed income group.
Standard General manages more than $600 million, according to Institutional Investor. Not too shabby.
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