Lion Capital, a private equity firm co-founded by Lyndon Lea and Robert Darwent urged American Apparel Inc (APP) to consider strategic options such as a sale of the company, according to report from Bloomberg based on information familiar with the situation.

The report indicated that Lion Capital sent a letter to American Apparel on Sunday requesting the leadership of the company to create a special committee to review its alternatives.

Lion Capital designates Mr. Lea to American Apparel’s board

Lion Capital withdrew the designation of Gene Montesano as director to the board of American Apparel. The private equity firm appointed Mr. Lea as director to company’s board on December 28, and requested to include him as member of the special committee that will be formed to evaluate strategic alternatives.

Lion Capital has the power to appoint a director under an earlier financing agreement with the company.

Lion Capital previously provided a loan to American Apparel. Earlier this year, Standard General bought out the $10 million loan given by the private equity firm to the retailer under the rescue deal.

American Apparel Inc (APP) Urged by Lion Capital to Consider a Sale

Lion Capital discloses 12.3% stake in American Apparel

The private equity firm recently disclosed a 12.3% stake in American Apparel on its regulatory filing with the Securities and Exchange Commission (SEC). The filing Lion Capital and Mr. Dov Charney, the founder and former CEO of the retailer maybe deemed part of a group that collectively and beneficially owns 99,071,836 shares or 49.7% stake of American Apparel.

Lion Capital clarified,” Neither the filing of this Schedule 13D nor any of its contents shall be deemed to constitute an admission that Lion/Hollywood is a member of a group with Mr. Charney for purposes of Section 13(d) of the Exchange Act or for any other purpose, and such membership is expressly disclaimed.”

The board of directors of American Apparel ousted Mr. Charney last month due to allegations that he misappropriated company funds and the sex scandal charges by an employee. Retail industry veteran Paul Scheneider took over his position as CEO.

American Apparel received buyout offer

American Apparel recently confirmed that it received a buyout offer from Irving Place Capital. The proposed acquisition price was $1.30 to $1.40 per share. The company said its board is reviewing the proposal seriously and it is focused on its successful turnaround.

Last week, American Apparel adopted a one-year shareholder rights plan or poison pill designed to strengthen its ability to protect its stockholders. The poison pill prevents any person or group from acquiring more than 10% of its shares.

The company also appointed Collen Brown as chairperson of its board of directors. Allan Mayer and David Danziger stepped down as co-chairman of the board of the company.