Mervyn's receives approval of California workers comp fund settlement

By Caroline Salls

Pittsburgh, Dec. 19 - Mervyn's, LLC received court approval of a $6.24 million agreement with the California Self-Insurers' Security Fund to settle a $36.93 million claim, according to a Wednesday filing with the U.S. Bankruptcy Court for the District of Delaware.

The company said employers in California are required to pay workers compensation claims and are required to secure those liabilities by providing a security deposit or by participating in an alternative security system.

Before it filed for bankruptcy, Mervyn's said it funded its workers compensation liabilities through a self-insured plan provided by ACE American Insurance Co. and by depositing $720,000 with the California Department of Industrial Relations.

In June 2008, the CDIR required Mervyn's to increase its security deposit by $28.39 million.

In October 2008, Mervyn's received court approval to liquidate its assets and close its stores. The company also stopped paying its workers compensation claims at that time.

The California Self-Insurers' Security Fund filed 11 proofs of claim in the bankruptcy case.

Of the total $36.93 million in claims, $27.89 million was secured debt, the fund contended.

Under the settlement:

• As of the plan effective date, the fund will receive an allowed general unsecured claim of $31.18 million;

• On or before Dec. 31, Mervyn's will pay the fund $6.24 million by wire transfer in satisfaction of the allowed fund claim;

• If the general unsecured creditors receive a percentage distribution of more than 20% under the company's plan of liquidation, the plan administrator will pay the fund the difference between the settlement payment and the amount the fund is entitled to as a general unsecured creditor; and

• If the general unsecured creditors receive a percentage distribution that is 20% or less, the fund will retain its full settlement payment.

Mervyn's, a San Francisco-based department store, filed for bankruptcy on July 29, 2008 in the U.S. Bankruptcy Court for the District of Delaware. Its Chapter 11 case number is 08-11586.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.