Zais: plan petitioner fires back at noteholder fund manager; objects to Chapter 11 dismissal motion

By Lisa Kerner

Charlotte, N.C., July 18 - Zais Investment Grade Ltd. VII plan proponents Anchorage Illiquid Opportunities Offshore Master, LP, Anchorage Capital Master Offshore, Ltd. and GRF Master Fund, LP filed an objection in response to a motion by Hildene Capital Management and Hildene Opportunities Master Fund, Ltd. to dismiss Zais' Chapter 11 case, according to a Monday filing with the U.S. Bankruptcy Court for the District of New Jersey.

Anchorage and its affiliates believe Hildene is unable to establish that either dismissal or abstention is appropriate and have asked the court to deny Hildene's motion.

As previously reported in June, A-2 noteholders' fund manager Hildene Capital was "surprised and troubled" by the plan of reorganization filed for Zais by three funds managed by Anchorage Capital. Noteholders were asked by Hildene to join in its motion for dismissal of the involuntary bankruptcy case filed by the Anchorage funds against Zais.

Hildene said the plan filed by Anchorage would transfer all of the assets of collateralized debt obligations to a new vehicle managed by Anchorage and foreclose any recovery by junior notes.

Anchorage, in its motion, said Hildene purchased its junior notes nearly three weeks after the involuntary petition was filed with full knowledge that holders of junior notes will not receive a distribution under the proposed plan.

"Hildene's obvious purpose in purchasing the notes and moving to have the Court dismiss the case is to impede the access of CDOs to the bankruptcy courts, because such access threatens other CDO positions that it manages," the Monday court filing said.

Zais is a Cayman Islands-based investment company. The involuntary Chapter 11 case was filed on April 1 in the U.S. Bankruptcy Court for the District of New Jersey, and the case number is 11-20243.

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