Zais Investment Grade VII: Hildene files objection to Anchorage plan, will file competing plan

By Lisa Kerner

Charlotte, N.C., Sept. 12 - Zais Investment Grade Ltd. VII A-2 noteholders' fund managers Hildene Capital Management LLC and Hildene Opportunities Master Fund, Ltd. filed an objection to the confirmation of the company's original pre-packaged Chapter 11 plan, according to a Monday filing with the U.S. Bankruptcy Court for the District of New Jersey.

The fund managers also objected to the approval of the related disclosure statement filed by Anchorage Capital Master Offshore, Ltd. and supported by plan proponents.

According to the Hildene parties, the Anchorage plan is not sufficient because of the following:

• The plan cannot be crammed down over class A-2 noteholders because there is a likely prospect that they are substantially "in the money";

• The plan was not proposed in good faith; and

• The plan contains illegal third-party releases and impermissibly grants the debtor a discharge.

A hearing is set for Oct. 5.

Hildene intends to file its own proposed plan within the next two weeks that will provide payment in full for class A-1 noteholders and "will permit each junior noteholder to the right to vote, giving all noteholders the voice that the indenture provides but Anchorage has sought to destroy," the filing said.

Plan filed in May

As previously reported in May, Zais' involuntary bankruptcy petitioners filed the pre-packaged plan and related disclosure statement with the U.S. Bankruptcy Court for the Northern District of Texas.

Zais also agreed to the termination of its exclusive periods for filing and soliciting votes on a plan.

The plan proponents said the company does not intend to file its own plan, and termination of exclusivity will help to move the bankruptcy case forward.

According to the disclosure statement, a new investment vehicle will be formed under the plan to hold, manage and eventually monetize substantially all of Zais' assets.

Under the proposed plan, treatment of creditors will include the following:

• Holders of administrative claims, tax claims, senior indenture administrative claims and indenture priority claims will be paid in full in cash;

• Holders of senior notes claims will receive their share of available cash for an estimated recovery of 71.84%; and

• Holders of junior note claims, subordinated claims, income note claims, general unsecured claims and old equity interests will receive no distribution.

The plan proponents include GRF Master Fund, LP, Anchorage Illiquid Opportunities Offshore Master, LP and Anchorage Capital Master Offshore, Ltd., which hold a combined $145.36 million principal amount of Zais' senior notes and $10 million principal amount of junior notes and income notes.

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

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