The Zohar Funds Seek Protection of Bankruptcy Court and Stay of Litigation to Monetize Assets and Fully Satisfy All Claims

NEW YORK--()--Lynn Tilton, the sole director of Zohar CDO 2003-1, Zohar CDO 2003-1 Corp., Zohar II 2005-1, Limited, Zohar II 2005-1 Corp., Zohar III, Limited, and Zohar III, Corp. (collectively, the “Zohar Funds”), today announced that the Zohar Funds have filed a voluntary Chapter 11 petition. The Zohar Funds are seeking the protection of the Bankruptcy Court in order to monetize their valuable assets and pay off all allowed claims in full.

Today’s filing will have no effect on the operations of the Portfolio Companies to whom the Zohar Funds have made senior secured loans. Business will continue as usual at the Portfolio Companies during the pendency of the bankruptcy, as this filing does not in any way trigger any defaults on Portfolio Company loans or business contracts or otherwise disrupt the companies’ operations.

Ms. Tilton explained: “The Zohar Funds have been tied up in litigation for years – with no effect other than to prevent me from refinancing the Portfolio Company loans and selling those same companies in order to maximize value for all of the Funds’ stakeholders. With the process and protections afforded under the Bankruptcy Code, we can now put to the side the fighting and focus on the strategy the Funds were structured to execute: to maximize and monetize the value of the assets for the benefit of all of the Funds’ stakeholders. It is expected that all claims will be repaid in full.”

As part of today’s filing, and in order to proceed as quickly and efficiently as possible, the Zohar Funds proposed that the Court appoint Mark Kirschner of Goldin Associates as Chief Restructuring Officer. Mr. Kirschner was previously the head of the bankruptcy and reorganization practice at Jones Day and has been an advisor and court appointed trustee in major bankruptcy matters, including Refco, Tribune, Le-Natures, Superior National, and Yellowstone Mountain Club.

The Zohar Funds are structured as collateralized loan obligations (“CLOs”) and have issued notes and preference shares to investors and made loans to the Portfolio Companies using the proceeds. Ms. Tilton and her Affiliates hold substantial equity stakes in these Portfolio Companies, which include iconic American manufacturing companies with tens of thousands of employees. Certain non-Zohar affiliates, as well as third party banks, are also lenders to the Portfolio Companies.

Pursuant to the Bankruptcy Code, today’s filing will stay certain litigation matters involving the Zohar Funds that were commenced after Ms. Tilton voluntarily resigned as Collateral Manager in 2016 and was replaced by Alvarez & Marsal Zohar Management, LLC. Ms. Tilton said: “While I stepped down as Collateral Manager to enable me to focus fully on maximizing the value of the Portfolio Companies for the benefit of all stakeholders, both at the respective Portfolio Companies and the Funds, it has become increasingly clear that value cannot be maximized in the litigious and charged atmosphere that currently exists. Unfortunately, I have come to the conclusion that Chapter 11 is the only path forward to maximize the value of the Zohar Funds’ assets.”

The Zohar Funds’ bankruptcy counsel is Young Conaway Stargatt & Taylor. The Chapter 11 petition was filed in the U.S. Bankruptcy Court for the District of Delaware.

Contacts

Brendan Riley, 212-333-3810
briley@brunswickgroup.com

Contacts

Brendan Riley, 212-333-3810
briley@brunswickgroup.com