Zohar III receives confirmation of Chapter 11 plan of liquidation

By Sarah Lizee

Olympia, Wash., June 21 – Zohar III, Corp.’s Chapter 11 plan was confirmed on Tuesday by the U.S. Bankruptcy Court for the District of Delaware, according to an order.

As previously reported, the company had received conditional approval of the disclosure statement following a claim subordination order.

Zohar’s plan distributes the debtors’ assets to their senior-most noteholders and credit enhancer. However, an equitable subordination complaint sought to alter those rights by placing the Patriarch stakeholders’ notes claims ahead of the credit enhancer and some of the debtors’ senior-most noteholders. However, judge Karen B. Owens rejected the Patriarch stakeholders’ equitable subordination complaint.

According to the disclosure statement, for each debtor, the plan will be implemented through a wind-down company, if applicable, wind-down administrator, asset recovery entity and asset recovery manager, litigation trust and litigation trustee.

Under the plan, administrative claims, professional claims, debtor-in-possession claims and priority tax claims will be paid in full in cash.

The adequate protection claims held by the indenture trustee against Zohar III will be deemed distributed to the holders of class 3 claims, which are Zohar III A-1 note claims, and will be satisfied by the treatment afforded to class 3 under the plan. On the effective date, the adequate protection claims held by the indenture trustee against Zohar II will be deemed distributed to the holders of class 10 claims, which are Zohar II credit enhancement claims, and will be satisfied by the treatment afforded to class 10 under the plan.

Holders of Zohar III, Zohar II and Zohar I other priority claims will receive a cash payment equal to the amount of the claims from the administrative and priority claims escrow account.

Indenture trustee claims against Zohar III and Zohar II will be assumed by Zohar III Recovery LLC and Zohar II Recovery LLC, respectively, and paid from the distributable cash of those entities.

Holders of Zohar III A-1 note claims will receive, in exchange for their claims, their pro rata share of the new notes assumed by Zohar III Recovery, and if applicable, the litigation trust, in the aggregate amount of $100,000; and 100% of the membership interests in New Zohar III LLC, provided that holders may also receive their pro rata share of the beneficial interests in a litigation trust.

Holders of Zohar III A-2 note claims, Zohar III A-3 note claims, Zohar III B note claims, Zohar II note claims, Zohar I A-3 note claims, Zohar I B note claims and general unsecured claims will receive no distribution.

Holders of Zohar II credit enhancement claims will receive, in exchange for their claims, their pro rata share of the new notes assumed by Zohar II Recovery, and if applicable, a litigation trust, in the aggregate amount of $100,000; and 100% of the membership interests in New Zohar II LLC, provided that holders may also receive their pro rata share of the beneficial interests in a litigation trust.

Holders of indenture trustee claims against Zohar I will be paid from the distributable cash attributable to Zohar I in the litigation trust applicable to Zohar I available after payment in full of all allowed administrative claims and priority claims against Zohar I.

Holders of Zohar I credit enhancement claims will receive the treatment in line with the Zohar I sale and a cash payment up to the allowed amount of their claims from the distributable cash attributable to Zohar I in the litigation trust applicable to Zohar I remaining after payment in full of the Zohar I indenture trustee claims.

Interests will be canceled with no distribution to holders.

The Patriarch shareholders had filed an objection to the plan.

Zohar is a Grand Cayman, Cayman Islands-based collateralized debt obligation. The company filed bankruptcy on March 11, 2018 under Chapter 11 case number 18-10512.

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