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LRI Holdings Objection Filed

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Cincinnati Insurance Company filed with the U.S. Bankruptcy Court an objection to LRI Holdings’ Disclosure Statement and Plan.

The objection asserts, “Cincinnati issued surety bonds on behalf of and at the request of the Debtors (the ‘Bonds’) primarily assuring certain of the Debtors’ obligations to utility providers (‘Utility Bonds’), liquor license issuers (‘Liquor Bonds’) and taxing authorities (‘Tax Bonds’). The total penal sum of the Bonds that are currently in place is $1,526,384….The current claims against the Utility Bonds, including anticipated claims noted in pleadings in this case, total no less than $206,574.65. Additional claims continue to be received and it is anticipated that claims on the Utility Bonds related to pre-petition utility bills will reach or exceed $500,000. The Debtors’ Disclosure Statement does not describe how the Debtors will meet their obligations to provide the surety bonds necessary for their continued operations. The Bonds Claims will likely exhaust many of the Utility Bonds.”

The objection continues, “Thus, the Debtors will be forced to obtain replacement bonds in order to continue their operations. This is true regardless of whether Cincinnati cancels the Bonds. Moreover, Cincinnati cannot be forced to allow the Bonds to remain in place and has the right, upon providing requisite notice, to cancel the Bonds. The Disclosure Statement does not address how the Debtors will avoid cancellation and/or replace the Bonds. Without certain of the Bonds, the Debtors will not be able to continue operation of certain of its locations and/or will not be able to serve alcoholic beverages at those locations.”

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