Patriarch Partners Seeks Reorganization of Zohar I Fund

NEW YORK--(BUSINESS WIRE)-- Patriarch Partners, LLC today announced that it has filed, through one of its affiliates (“Patriarch”), an involuntary Chapter 11 petition for Zohar CDO 2003-1, Limited (“Zohar I”). Patriarch is Zohar I’s largest creditor, holding $286.5 million face amount of Zohar I notes. Patriarch has placed Zohar I into Chapter 11 in order to protect Zohar I and Patriarch from the efforts of MBIA Inc. and MBIA Insurance Corporation (together, “MBIA”), another creditor of Zohar I, to obtain Zohar I’s assets for itself. By filing the Chapter 11 case, Zohar I has obtained certain protection under the U.S. Bankruptcy Code.

Today’s filing will have no effect on the operations of the portfolio companies whose loans are held by Zohar I. This filing does not trigger any defaults on portfolio company loans. Moreover, neither Zohar II 2005-1, Limited (“Zohar II”), nor Zohar III, Limited (“Zohar III”), two additional investment funds managed by Patriarch and certain of its affiliates, are part of today’s filing. They will not be subject to any cross-defaults.

Lynn Tilton, Chief Executive Officer of Patriarch said, “We did not make this decision to file Zohar I for Chapter 11 protection lightly and have done so only after numerous good faith attempts to accomplish a fair and transparent restructuring of Zohar I with MBIA outside of court. We believe the Chapter 11 process now presents the best way for Zohar I to restructure its finances while preserving the value of the portfolio companies it owns on behalf of its key stakeholders.”

Patriarch’s business model is to invest, through managed investment funds, in loans issued to deeply distressed companies and to seek to turn those companies around. Zohar I is structured as a collateralized loan obligation and has issued notes to investors and made loans to the portfolio companies with the proceeds of the notes. Patriarch affiliates hold substantial equity stakes in many of these portfolio companies, which include iconic American manufacturing companies with tens of thousands of employees. Certain affiliates are also lenders to the Zohar I portfolio companies.

Following the financial crisis of 2008, Patriarch recognized that Zohar I would require time beyond its stated maturity date of November 20, 2015, to create value and to pay off the notes. In light of this – and as outlined in a lawsuit filed by Patriarch on November 2, 2015 – Patriarch initiated discussions with MBIA, a monoline insurer that insured approximately $150 million in Zohar I notes, regarding an extension of the maturity date of Zohar I and an associated global restructuring of the Zohar funds. For over three years, Patriarch worked tirelessly and in good faith to achieve a plan for restructuring the Zohar funds that would be in the best interests of all constituencies, including MBIA and the Zohar noteholders.

As part of these efforts, and as set forth in more detail in the November lawsuit, Patriarch spent more than $100 million to buy out a third-party noteholder in Zohar I that MBIA had indicated was an “impediment” to an extension of Zohar I and a global restructuring of the Zohar funds. Yet, even after Patriarch removed this “impediment,” MBIA refused to consent to an extension of Zohar I – which would have paved the way for a restructuring.

Tilton continued: “Our decision to file Zohar I for bankruptcy and to seek court approval for a plan of reorganization that will pay MBIA in full, while maximizing value for Patriarch, only emerged when it became clear that MBIA had acted in bad faith throughout our discussions. A Chapter 11 filing is now the only course of action available that allows us to continue our efforts to turn around and build value at the portfolio companies, preserve their value on behalf of all of our stakeholders and protect the jobs of the tens of thousands of our portfolio companies’ employees.”

Patriarch’s restructuring counsel is Skadden, Arps, Slate, Meagher & Flom LLP and its financial advisor is Moelis & Co. The Chapter 11 petition was filed in the U.S. Bankruptcy Court for the Southern District of New York.

About Patriarch Partners

Patriarch Partners, LLC, together with certain of its affiliated entities, is an investment firm and holding company dedicated to saving American manufacturing jobs and American companies. Founded by Wall Street veteran Lynn Tilton in 2000, Patriarch, through affiliated investments funds, has had ownership in and restructured more than 240 companies with combined revenues in excess of $100 billion, representing more than 675,000 jobs. Tilton’s platform is the largest woman-owned business in the country, managing 74 companies, including investments in Dura Automotive, Stila Cosmetics, Rand McNally, Spiegel Catalogs and MD Helicopters. For more information, please go to www.patriarchpartners.com.

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Patriarch Partners, LLC

Richard White, (212) 825-6836

[email protected]

Source: Patriarch Partners, LLC