By  on January 21, 2014

Specialty chain Dots has filed a voluntary Chapter 11 petition for bankruptcy court protection.

The petition was filed in a Newark bankruptcy court under the corporate name Dots LLC. The company said it will pursue a restructuring plan that includes the sale of the company as a going concern. The petition also estimated $50 million to $100 million in assets, and $100 million to $500 million in liabilities.

Dots has secured a commitment of $36 million in debtor-in-possession financing from Salus Capital, its existing lender. The retail chain has also shuttered more than 30 underperforming stores, and will continue to evaluate the possibility of additional store closures over the next few months. The company, which targets the women ages 25 to 35 in the value price distribution channel, has 1,250 full-time employees and 2,250 part-time staffers.

Lisa Rhodes, the retail chain’s chief executive officer, said in a statement filed with the bankruptcy court that “prior management instituted a number of new merchandising strategies and operational tactics that resulted in a downturn in store traffic and overall financial performance” in the fourth quarter of 2011, and that the chain’s financial issues were exacerbated by “adverse economic conditions,” as well as a burdensome lease portfolio.

Rhodes said the new management team, hired in the second half of 2012, has instituted a repositioning strategy, and that the retailer is still in turnaround mode. While Irving Place Capital, which acquired the company in 2011, has “devoted significant resources to fund the company’s operations and cash needs,” Dots continues to face hurdles regarding meeting cash and noncash obligations, she said.

The ceo added that Dots’ liquidity became strained in October when some vendors and factors either shortened the time frame for payment for goods or began demanding payment upon delivery.

Dots hired consulting firm PwC and legal counsel Lowenstein Sandler in December to evaluate strategic options, including the sale of the company.

For the fiscal year ended Jan. 31, 2013, Rhodes said Dots posted $338.8 million in sales, versus $346.2 million in the same 2012 period. That compares with the $293.7 million sales estimate for the year ending Jan. 31, 2014.

The top 10 unsecured creditors are Robert A. Glick, Chagrin Falls, Ohio, noteholder in the amount of $14.1 million; CIT Group, New York, $1.7 million; Wells Fargo, Woburn, Mass., $1.1 million; Hana Financial Inc., Los Angeles, $929,901.88; Heart & Hips, Vernon, Calif., $831.131.51; Rosenthal & Rosenthal, New York, $698,790.28; Merchant Business Credit, New York, $544,810.36; Finance One Inc., Los Angeles, $533.227.76; Jacmel Jewelry Inc., Long Island City, N.Y., $495,278.15, and Land N Sea, New York, $426,634.24.

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