Former Wet Seal claims right to $4 million from drawn credit letter

By Kali Hays

New York, June 17 – Seal123, Inc., formerly Wet Seal, Inc., is seeking approval of a stipulation that will provide for the remittance of $4.04 million related to a letter of credit drawn by the CIT Group/Commercial Services, Inc., according to a Wednesday motion with the U.S. Bankruptcy Court for the District of Delaware.

CIT represented several clients that were vendors of Wet Seal prior to the company filing for Chapter 11, and CIT asked that a $6 million letter of credit be issued to assure financial accommodations were met. The letter was issued by Bank of America, NA.

After the company entered bankruptcy, CIT drew on the full amount of the letter and has since used $1.96 million toward payment of some open accounts, but Wet Seal claims that the $4.04 million remaining is owed to the company, according to the motion.

Under the proposed stipulation, CIT has agreed to return the balance of the letter to Mador Lending, LLC, as the buyer of substantially all Wet Seal’s assets, within seven business days of an order approving the motion.

The stipulation also bars all parties from any current or future claims against one another.

A hearing to consider the agreement is set for June 23.

Wet Seal, a Foothill Ranch, Calif.-based clothing retailer, filed for bankruptcy on Jan. 15 under Chapter 11 case number 15-10081.

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