Zais noteholders disclosure statement approved; plan hearing Feb. 6

By Lisa Kerner

Charlotte, N.C., Nov. 9 - Fund managers Hildene Capital Management LLC and Hildene Opportunities Master Fund, Ltd., for noteholders of Zais Investment Grade Ltd. VII A-2, won approval of their disclosure statement in the U.S. Bankruptcy Court for the District of New Jersey on Wednesday, according to an attorney familiar with the case.

A plan confirmation hearing is tentatively set for Feb. 6, the attorney said.

As previously reported, Hildene filed a competing plan of reorganization and related disclosure statement in Zais' bankruptcy case in October.

The fund managers objected to the plan proposed by Anchorage Capital Master Offshore, Ltd. arguing that the Anchorage plan is not sufficient because of the following:

• The plan cannot be crammed down over class A-2 noteholders because there is a likely prospect that they are substantially "in the money";

• The plan was not proposed in good faith; and

• The plan contains illegal third-party releases and impermissibly grants the debtor a discharge.

Creditor treatment

Specific creditor treatment under the Hildene plan includes the following:

• Holders of administrative claims, tax claims, indenture priority claims and senior indenture administrative claims will be paid in full in cash;

• Holders of class A-1 note claims will retain all rights under the indenture and will be entitled to payment in accordance with the indenture, for an estimated 100% recovery.

If these creditors vote in favor of the Hildene plan, they will be entitled to specified releases:

• Holders of class A-2 note claims will retain their rights under the indenture and be entitled to payment in accordance with the agenda; provided however, that these creditors waive their right to post-bankruptcy interest and receive a share of new common equity;

• Holders of class A-3 note claims, class B-1 note claims and class B-2 note claims will receive a share of preferred equity interests; and

• Holders of subordinated claims, income note claims, general unsecured claims and old equity interests will receive no distribution.

Under the Anchorage plan filed in connection with Zais' involuntary Chapter 11 case, a new investment vehicle will be formed to hold, manage and eventually monetize substantially all of Zais' assets.

Zais is a Cayman Islands-based investment company. The involuntary Chapter 11 case was filed on April 1, 2011. The case number is 11-20243.

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