Anna’s Linens creditors oppose $1.25 million in bid-related payments

By Caroline Salls

Pittsburgh, July 13 – Anna’s Linens, Inc.’s official committee of unsecured creditors objected to the company’s proposed agency agreement bid protections, according to a Monday filing with the U.S. Bankruptcy Court for the Central District of California.

Specifically, the committee said it opposes the company’s request to pay a $650,000 break-up fee and $350,000 expense reimbursement to Tiger Capital Group and Yellen Partners, LLC and a $250,000 break-up fee to Great American, LLC.

The creditor group said Anna’s Linens and its lenders “made a calculated decision to conduct the key aspect of the case outside of the purview of the court and with no creditor involvement whatsoever.”

The committee said the company entered into a stalking horse agreement, granted bid protections and conducted an auction of competing liquidators and entered into a final agreement with the winning bidder before its bankruptcy case began.

The winning bidder was a joint venture comprised of Hilco Merchant Resources, LLC and Gordon Brothers Retail Partners, LLC, according to the objection.

“All that remained was to commence a bankruptcy case to override state law and contractual impediments to liquidation sales,” the committee said in the objection.

The committee said Anna’s is now asking the court to approve the payment of $1.25 million in sale-related fees as if they were post-bankruptcy administrative expenses.

“The law does not permit this tactic,” the committee said. “There is no contract with a debtor-in-possession.”

Instead, the committee said the company only has a pre-bankruptcy stalking horse agreement to give Tiger/Yellen $1 million in bid protections, with $200,000 being paid up front, despite being advised that a Hilco/GB joint venture would match the bid without a break-up fee or expense reimbursement.

The committee said Anna’s subsequently agreed to give an additional $250,000 to Great American as a condition for making a bid that was immediately topped by Hilco/GB.

A hearing is scheduled for July 22.

Anna’s Linens, a Costa Mesa, Calif.-based home decor retailer, filed for bankruptcy on June 14. The Chapter 11 case number is 15-13008.

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