American Apparel is being urdged to consider options including a sale of the company

American Apparel is being urdged to consider options including a sale of the company

Hedge fund Lion Capital is understood to have sent a letter to the board of American Apparel, pressing the struggling retailer to consider options including a sale of the company.

According to the Wall Street Journal, the letter, which was sent Sunday (28 December), said Lion Capital would nominate Lyndon Lea, one of its founders, to the board to replace one of its previous designees, Gene Montesano.

Lion Capital, which had lent money to American Apparel and holds warrants that could give it a big stake, urged the retailer's board to create a special committee to evaluate strategic alternatives, including a sale, sources told the publication.

The fund holds warrants to buy 12% of American Apparel's stock and has the right to nominate two directors to the company's board, the WSJ noted.

Lion Capital's request follows a bid by Irving Place Capital for up to $1.40 a share, an offer that American Apparel's board believes is far too low, Reuters reported.

Last week, American Apparel adopted a so-called 'poison pill' stockholder rights plan - its second this year - which the company says is designed to strengthen the ability of the board to protect its shareholders.

The company last week appointed industry veteran Paula Schneider as its new chief executive, with effect from 5 January.