Dots seeks OK of settlement agreement to avoid costly litigation

By Kali Hays

New York, Feb. 28 - Dots, LLC is seeking a court order approving a compromise and settlement between the company, its official committee of unsecured creditors, pre-bankruptcy lenders and debtor-in-possession lenders, according to a Friday filing with the U.S. Bankruptcy Court for the District of New Jersey.

The company is requesting the order because the settlement "will fully resolve numerous complex, disputed issues among the settlement parties" and allow its Chapter 11 cases "to move forward without undue delay, uncertainty, and expense" including its liquidation and wind-down of business, the motion stated.

As previously reported, the company received court approval on Feb. 27 to sell its assets through store-closing sales carried out by Gordon Brothers Retail Partners, LLC.

Among the terms of the settlement agreement is the automatic release of liens on avoidance actions, the termination of the lien challenge period, release of the settlement parties from all Chapter 11 related responsibilities, and the creation of a separate trust account controlled by the company and its committee intended to pay creditors and expenses.

The separate account will be funded with net sale proceeds in four installments, with each installment representing a specified percentage of between $35 million and $45 million in total net sale proceeds.

The settlement also requires an amendment to its debtor-in-possession agreement that implements "a funding mechanism enabling the debtors to undertake an orderly wind-down after the DIP revolver is paid off and retired."

The company claims that without approval of this settlement it could be "mired in years of litigation" that would take focus away from its liquidation, and therefore deprive its creditors maximum recovery.

Dots, a Glenwillow, Ohio-based women's clothing and accessories retailer, filed for bankruptcy on Jan. 20 under Chapter 11 case number 14-11016.

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