NEW YORK -- Doe Spun Inc., a children's apparel manufacturer operating in Chapter 11, has settled litigation with its pre-petition bank, paving the way for an amended reorganization plan.

Doe Spun filed its Chapter 11 petition here in April after the bank, York Bank & Trust Co., demanded immediate payment of a loan. The bank had asserted a lien on most of Doe Spun's assets, and in August, Doe Spun sued the bank to avoid the lien.

In December, the company filed a plan offering unsecured creditors a pro rata share of an asset pool to be established. With the bank settlement, Doe Spun and its unsecured creditors' committee are negotiating an amended plan. Unsecured claims total $14.6 million.

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