Which Is Worse: Bankruptcy, or Dov Charney?

Fashion pimp of trendy hose American Apparel is in mortal financial peril at the moment; it needs an infusion of cash to stave off a possible bankruptcy. Investors have the cash, and the interest in the brand; what they don't have, in all likelihood, is an interest in handing a huge pile of cash over to the sole control of Dov Charney, who—despite his unshakeable confidence in himself—is the one who got the company in this situation in the first place.

He also gets sued with terrifying regularity.

So while investors would probably prefer an American Apparel without Dov Charney as CEO, Dov—the company's biggest shareholder—does not like the idea at all. And here we are. It's decision time. The company's board has to decide whether to accept a $10 million loan offer, or to face bankruptcy. It desperately needs the cash. But the NY Post reports that the board is hesitating, because they're so scared of Dov cementing his own power:

Sources said proposed terms of the financing are expected to dilute the company's current shareholders — with the possible exception of Charney. That's because a proposed "earn-out" provision would give Charney, who is the company's majority shareholder, options to acquire additional shares if the stock appreciates in the future, according to one source.

The bigger concern among some directors, however, is that the deal could bolster Charney's position as he tries to reassert control over American Apparel's struggling stores.

So presumably some American Apparel board members find bankruptcy to be a more appetizing prospect than a future in which Dov Charney continues to exert total business and creative control over the company.

At least they can all agree not to hire ugly people.

[NYP]