American Apparel Inc is in talks with Standard General, the New York-based hedge fund that controls 43 percent of the company's stock, to secure funding that would let the retailer pay off a $10 million loan and replace its board except for two co-chairmen, the Wall Street Journal reported on Sunday.
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The loan from Lion Capital came due after the board ousted Dov Charney, American Apparel's founder and former chief executive officer.
Citing unnamed sources, the Wall Street Journal said that Standard General is awaiting the results of an investigation into Charney's behavior. Should he be cleared of wrongdoing, Charney could remain with the clothing and accessories company, though perhaps not as its CEO, the newspaper reported.
Charney was fired in June over accusations that he misused corporate funds and for his alleged role in disseminating nude photos of an ex-employee.
Reuters reported on July 3 that Charney had handed over his stake and voting rights in the company to Standard General to let it negotiate with independent directors to determine the company's future.
Neither American Apparel nor Standard General returned calls for comment.
The retailer's stock has fallen 29.3 percent for the year to date.