Despite the fact that his company's been on the brink of bankruptcy for some time--and never mind those pesky sexual harassment accusations --Dov Charney has just been signed to another three-year contract as CEO with American Apparel, according to WWD.
Even with the $80 million lifeline American Apparel recently received from George Soros-backed Crystal Financial LLC and and Salus Capital Partners LLC, American Apparel may still be destined for bankruptcy because that deal came with a high interest rate of 9.5%, adding to the company's already crippling debt. (They owe a whopping $116 million to London-based Lion Capital, at an interest rate of 18% per year.) Ouch.
So it's somewhat surprising to learn that Charney is still raking it in: According to WWD, Charney's new contract sets his salary at a minimum base of $800,000 a year. What's more, Charney will be eligible to receive incentive bonuses with a target of 150 percent of his base salary, as well as 7.5 million additional shares of American Apparel stock, if he reaches certain goals.
Those goals include reaching certain earnings before interest, taxes, depreciation and amortization (EBITDA) targets over the next three years: $32.3 million of EBITDA in 2012, $53.3 million in 2013 and $68.2 million in 2014. Given that the company recently projected $32 million to $40 million in EBITDA for 2012, there's a good chance Charney will get his extra shares this year--though the following years might prove more of a challenge.
However, the EBITDA goals for the CEO will be significantly lowered if Charney can figure out how to refinance American Apparel’s crushing debt. And we all know how good Charney is at that (read: not very). Still, it's pretty incredible that Charney continues to inspire faith from his financial backers. And who knows, maybe this extra money will be just the ticket to get Charney to finally turn the company around.