Zohar III secured parties say cash use order affects settlement terms

By Caroline Salls

Pittsburgh, Oct. 31 – A group of Zohar III, Corp. secured parties objected Tuesday to the company’s motion for approval to use cash collateral, according to a filing with the U.S. Bankruptcy Court for the District of Delaware.

The secured parties include Patriarch Partners XV, LLC, Octaluna, LLC, Octaluna II, LLC, Octaluna III, LLC, Patriarch Partners, LLC, Patriarch Partners VIII, LLC and Patriarch Partners XIV, LLC.

Through the proposed cash collateral use order, the secured parties said the MBIA/Zohar controlling parties are trying to renegotiate essential terms of a settlement agreement approved by the court in May “by imposing on the debtors terms and conditions for the use of cash collateral that vitiate these cardinal principles and other essential elements of the settlement agreement, as well as a prior order of this court holding in abeyance the allocation of the independent directors’ fees.”

The secured parties said the Zohar III debtors propose a stipulation in the cash collateral order that other stakeholder creditors’ liens and claims will be allowed without challenge, resulting in an “undisclosed $148 million windfall to MBIA that violates the settlement agreement.”

In addition, the secured parties said the proposed order impairs the Zohar III debtors’ and Patriarch’s ability to satisfy settlement agreement milestones if creditors are paid 50% of specified amounts set in the settlement by Aug. 21, 2019 and expands the creditors’ access to confidential information “beyond the narrow information rights that were negotiated under the settlement.”

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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