Anna’s Linens $240,869 letter-of-credit dispute resolution approved

By Caroline Salls

Pittsburgh, May 18 – Anna’s Linens, Inc.’s Chapter 7 trustee received court approval of a settlement reached with Liberty Mutual Insurance Co., according to an order filed Thursday with the U.S. Bankruptcy Court for the Central District of California.

Chapter 7 trustee Karen Sue Naylor said in the motion that Anna’s and Liberty Mutual entered into insurance policies. Anna’s provided a $1.2 million letter of credit, issued by Union Bank of California, to secure its obligations under the policies.

Following Anna’s bankruptcy filing, Naylor said Liberty drew on the letter of credit to satisfy the company’s collateral funding obligations and to fund Liberty’s continuing obligations under the policies.

However, the trustee now contends that the proceeds of the letter of credit have overfunded the company’s collateral obligations, meaning the estate is therefore entitled to at least some portion of the proceeds of the letter of credit.

Liberty, on the other hand, believes is entitled to keep all of the letter-of-credit proceeds until Liberty’s obligations under the policies are fully extinguished.

Under the settlement, Liberty will pay $240,869 from the policy collateral to Anna’s to resolve the dispute.

Anna’s Linens, a Costa Mesa, Calif.-based home decor retailer, filed for bankruptcy on June 14, 2015. Its Chapter 11 case number is 15-13008.

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