Dov Charney, former CEO of American Apparel
Photograph by Keith Bedford — Bloomberg via Getty Images
By Dan Primack
December 22, 2014

Dov Charney would not be brought back as CEO of American Apparel (APP) if a New York private equity firm succeeds in buying the company, Fortune has learned. Charney, who founded the apparel retailer before being fired earlier this year, also would not be given any sort of managerial role, but possibly could serve in some sort of advisory capacity. Put another way, this bid is not being done in partnership with Dov Charney.

The private equity firm in question is Irving Place Capital, which reportedly has bid to buy American Apparel for between $1.30 and $1.40 per share. That represents a 31% premium over the Los Angeles-based company’s closing share price last Friday, but well short of the $3.25 floor that the it is trying to set via the use of a “poison pill” — even though American Apparel stock hasn’t traded that high since 2010.

An Irving Place spokesman declined to comment for this story.

Charney, who was ousted as CEO this past June due to alleged misconduct, told Bloomberg earlier today that he was down to his last $100,000 and sleeping on a friend’s couch. Not exactly a ringing self-endorsement for his financial management skills, given that Charney’s most recent annual salary was $800,000.

He also claimed to have been betrayed by Standard General, the hedge fund to which he had effectively pledged his voting rights in order to get a July loan that boosted his company ownership to 43% (a charge the hedge fund denies). He believed that Standard General would restore Charney to either CEO or some other role “effectively running the company,” following the conclusion of an internal investigation into his supposed misdeeds, but instead he was officially cut loose last week after directors “began to doubt his trustworthiness,” according to the WSJ.

It remains unclear who Irving Place Capital would put in charge of American Apparel, were it to succeed in its pursuit. Paula Schneider is scheduled to take over as CEO on January 5, and has historical ties both to both Charney and the private equity industry.

It is possible that Irving Place would retain Schneider, but it also might be looking at a much more radical transformation. The firm has some troubles of its own, having scrapped a new fundraising plan in late 2012 due to poor performance — instead receiving a two-year investment extension from its investors. That elongation expires in February, although sources say that Irving Place gets another 6 months to complete any deal that already is considered to be in process (as designation under which American Apparel would fall).

In total, Irving Place is said to have around $700 million in dry powder remaining from the $2.7 billion fund that it raised back in 2006 (when it was still known as Bear Stearns Merchant Banking). There also is talk that it is working on some other type of nontraditional capital raise — perhaps a stapled secondary — although the American Apparel bid would not be contingent on such a transaction occurring.

“We’ve been told to expect some sort of news soon on what they plan to do, and the firm is pretty transparent with us, but we haven’t heard specifics yet,” said a limited partner in the current Irving Place fund.

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