Zohar III settlement with noteholders, funds, Tilton, MBIA approved

New York, May 21 – Zohar III Corp.’s settlement with its class of noteholders, six Zohar funds, Lynn Tilton and MBIA Insurance Corp. was approved by the U.S. Bankruptcy Court for the District of Delaware, according to a court order filed on Monday.

The funds include Zohar CDO 2003-1, Zohar CDO 2003-1 Corp., Zohar II 2005-1, Ltd., Zohar II 2005-1 Corp., Zohar III, Ltd. and Zohar III, Corp.

As previously announced, the parties have agreed to a deal that will include a stay of all pending litigation between them.

“This agreement is intended to facilitate the refinancing and monetization of assets of the Zohar funds to the benefit of all stakeholders, and the parties have agreed to work in a mutually cooperative process in support of such refinancing and monetization,” the parties said in an earlier news release.

As part of the agreement, an independent director will be appointed to govern the funds, along with a chief restructuring officer, who together with Tilton as director and manager of each portfolio company, will jointly implement the refinancing and monetization process.

During the process, Tilton will remain in her current roles at the portfolio companies, all litigation between the parties will be stayed for at least 15 months, and the bankruptcy cases will proceed without the appointment of a trustee.

“This agreement is a meaningful and important step towards allowing the Zohar Funds to monetize and refinance their assets in order to pay off all creditor claims in full,” Tilton said in the release. “It is in the best interest of all stakeholders that we lay down our swords and stop the years of damaging litigation in order to maximize value for all of the funds’ stakeholders.”

Anthony McKiernan, chairman of MBIA Insurance, added: “MBIA is pleased that the parties have been able to come to a consensual agreement that will put in place a process to enable MBIA to recover on the significant amounts it has paid its policyholders.”

The agreement will have no immediate effect on the operations of the portfolio companies to which the Zohar funds have made senior secured loans. Those portfolio companies will continue to operate in the ordinary course.

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

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