Apparel Maker Cherokee Files Its Second Chapter 11 Petition

Cherokee Inc. said it filed its prepackaged Chapter 11 reorganization petition Monday in federal Bankruptcy Court in Delaware.

The Sunland apparel maker reportedly listed $107.1 million in assets and $122.8 million in debts. It is the second Chapter 11 filing for the company, which is burdened by debt from a 1989 leveraged buyout.

Of the liabilities listed, $95.3 million was unsecured, with $4 million of the unsecured claims being disputed. Secured debt is $27.5 million, all of it held by CIT Group. The secured debt will carry through the reorganization, according to Cherokee Chief Financial Officer Cary D. Cooper.

Cowan & Co. in New York, a Cherokee note holder, is listed as the largest unsecured creditor, with a $12.1-million claim.

As previously announced, Cherokee’s bankruptcy plan calls for swapping all its 11% senior subordinated notes due in 1999 for about 89.9% of the common stock of the reorganized Cherokee. All outstanding trade debt would be exchanged for about 8.3% of the common stock of the reorganized company, and existing Cherokee stock would be converted to about 1.8% of the post-bankruptcy company.

The plan is expected to reduce Cherokee’s long-term debt from about $100 million to $19 million.

Cherokee entered and emerged from another prepackaged bankruptcy last year. In the fiscal year ended May 28, it lost $24.8 million on $114.1 million in sales.