Zais Investment Grade petitioners tweak junior noteholders' treatment

By Jim Witters

Wilmington, Del., Nov. 14 - Zais Investment Grade Ltd. VII's involuntary bankruptcy petitioners changed the treatment of junior noteholders in a modified Chapter 11 plan filed Friday with the U.S. Bankruptcy Court for the District of New Jersey.

The changes also raised the estimated recovery for senior noteholders to 100% from 71.84%.

No hearing has been scheduled.

Treatment of creditors

Under the modified plan, treatment of creditors will include:

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

• Holders of senior notes claims will receive their share of available cash for a recovery not to exceed 100% of the claim plus interest paid from the effective date at the contract rate (was an estimated recovery of 71.84%);

• Holders of A-2 junior note claims will receive their share of available cash after all senior note claims are paid in full;

• Holders of A-3 junior note claims will receive their share of available cash after all senior note claims and all A-2 junior note claims are paid in full;

• Holders of B-1 junior note claims will receive their share of available cash after all senior note claims and all A-2 and A-3 junior note claims are paid in full;

• Holders of B-2 junior note claims will receive their share of available cash after all senior note claims and all A-2, A-3 and B-1 junior note claims are paid in full; and

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

In the previous version of the plan, holders of junior note claims were to receive no recovery.

Components unchanged

As previously reported, the plan calls for formation of a new investment vehicle to hold, manage and eventually monetize substantially all of Zais' assets.

On the plan effective date, Zais will transfer all of its collateral securities and other designated assets to a new entity in exchange for a new LP interest in the new company and any cash needed to fund the company's senior obligations.

Z-CDO Liquidation Fund GP, LLC, an affiliate of the investment manager of the plan proponents, will be the new company's general partner, and Anchorage Capital Group, LLC will be its investment manager, responsible for liquidating the designated assets.

To the extent necessary to provide cash to make plan payments, the plan proponents said they would obtain an up to $5 million exit facility.

The plan proponents include GRF Master Fund, LP, Anchorage Illiquid Opportunities Offshore Master, LP and Anchorage Capital Master Offshore, Ltd., which hold a combined $145.36 million principal amount of Zais senior notes and $10 million principal amount of junior notes and income notes.

Competing plan

As previously reported, fund managers Hildene Capital Management LLC and Hildene Opportunities Master Fund, Ltd., for noteholders of Zais Investment Grade Ltd. VII A-2, have filed a competing plan and won court approval of their disclosure statement.

A plan confirmation hearing is tentatively scheduled for Feb. 6.

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

Under the Hildene plan, creditor treatment includes:

• 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.

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.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.