Clothing maker Donnkenny Inc has filed for Chapter 11 bankruptcy protection after its biggest creditor, CIT Group/Commercial Services, decided to withdraw its funding.

Papers filed with the Federal Bankruptcy Court in Manhattan said CIT reached its decision after Donnkenny broke particular covenants agreed under a $65 million credit deal.

New York-based Donnkenny also revealed it has entered into a non-binding agreement to sell assets including its Pierre Cardin and Nicole Miller licenses to Donn K Acquisition LLC.

Terms of the agreement weren't disclosed.

Court papers showed Donnkenny has assets and liabilities each worth $45.6m, and over 4.3m common shares outstanding.

Donkenny said last December that it was considering all possible alternatives as part of a restructuring drive, including a possible sale of the company. Net losses for the fourth quarter of 2004 increased to $5.0m compared to $0.4m in the same period in 2003.

The company manufactures clothing in countries including India, China and Mexico and sells to retail chains such as Macy's, JC Penney and Kohl's.