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Reuters: Bankrupt Clothier Ellen Tracy Nets $20MM for Creditors

March 01, 2013, 08:00 AM
Filed Under: Bankruptcy
Related: Wells Fargo

Reuters reported bankrupt clothing brand Ellen Tracy has scored $20 million for its creditors by settling a lawsuit against its former owners and lender Wells Fargo over a 2008 asset purchase from Liz Claiborne.

Wells Fargo will pay $750,000 to the Ellen Tracy estate and waive another roughly $10 million in legal claims, according to settlement papers filed on Wednesday in U.S. Bankruptcy Court in Manhattan.

So-called "non-bank" defendants in the lawsuit will pay $2.75 million to the estate and waive $6.5 million in claims, the papers show. The non-bank defendants include Hilco, one of the investment firms that acquired Ellen Tracy, a former unit of fashion company Liz Claiborne, in 2008.

The total value of the settlement to the defunct Ellen Tracy brand is about $20 million.

"Absent the settlement ... there would be no funds available to pay allowed claims" for creditors, Al Togut, the lawyer in charge of liquidating the company, said in settlement papers.

Togut had sued Hilco, Wells Fargo and others for breaching their fiduciary duties in the acquisition and management of Ellen Tracy.

Togut said Hilco made Ellen Tracy insolvent from the outset by making it a co-obliger on $32 million in debt that belonged to another entity owned by the same investment group.

View entire Thomson Reuters story.

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