Recently I had a paper sent back to me (rejected) with two referee reports. This is not that surprising as this was a very good journal. The problem is that the identity of one of the referees is revealed even though it's supposed to be a single-blind system. This wouldn't be too much of a problem usually, but the identity of the referee turns out to be one of my letter writers, and someone I've worked with closely.
This creates a very awkward situation for me. Any advice?