Zais Investment Grade VII noteholders seek involuntary case dismissal

By Caroline Salls

Pittsburgh, May 23 - Zais Investment Grade Ltd. VII A-2 senior secured noteholders Hildene Capital Management and Hildene Opportunities Master Fund, Ltd. asked the U.S. Bankruptcy Court for the District of New Jersey to dismiss the involuntary bankruptcy case filed against Zais, according to a Monday court filing.

"This case is the classic example of a creditor using an involuntary bankruptcy case to improperly obtain a disproportionate advantage against other creditors," the Hildene entities said in the motion.

Hildene said Anchorage Capital Group, LLC filed the involuntary case against Zais in an attempt to force a sale or liquidation of the company's assets without obtaining the consent of a majority of the company's noteholders.

"Such a purpose is a paradigm example of a bad faith filing - improperly using bankruptcy to obtain a litigation or tactical advantage," Hildene said in the motion.

In addition, Hildene said the bankruptcy case filed by Anchorage only benefits Zais' class A-1 noteholders.

The Hildene entities said Zais has no business, no employees, no officers and no intention of filing a plan or trying to reorganize.

The noteholders said Zais has been in default for several years, "but there has been no rush to the courthouse to take action" most likely because the company's only meaningful creditors are the secured noteholders and the indenture places restrictions on noteholders taking individual action.

Hildene also said Zais is not eligible to be a Chapter 11 debtor because it is a Cayman Islands company with no place of business or property in the United States.

Anchorage was also not eligible to file the involuntary case, according to the motion, because all of the noteholders have only non-recourse claims secured by Zais' assets and no unsecured deficiency claims.

"Anchorage is attempting something unprecedented and extraordinarily disruptive - ignoring the terms of an indenture by forcing a Cayman Islands CDO into bankruptcy in the United States when all facts demonstrate Anchorage should not be able to do so," the Hildene entities said in the motion.

A hearing is scheduled for June 20.

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

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