Zohar I requests court approval to dismiss Chapter 11 cases

By Mark Reccek

Bethlehem, Pa., Dec. 15 – Zohar CDO 2003-1 Ltd. requested court approval to dismiss the Chapter 11 cases, according to a motion filed Monday in the U.S. Bankruptcy Court for the Southern District of New York.

The company argues the involuntary petitions should be dismissed because such petitions filed against limited purpose entities like Zohar is contrary to the practices in the collateralized debt obligation and collateralized loan obligation markets, and will result in a disruption of pricing, risk analysis and trading in the global structured finance markets.

“Alternatively, the Zohar entities respectfully request the court to abstain from the involuntary Chapter 11 cases on the basis that they were commenced solely to resolve a dispute between two creditors that is already the subject of prior litigation commenced by the petitioning creditor," the motion said.

As previously reported, Patriarch Partners LLC filed through one of its affiliates an involuntary Chapter 11 petition for Zohar.

Patriarch said it is Zohar I’s largest creditor, holding $286.5 million face amount of Zohar I notes.

Patriarch said it placed Zohar I into Chapter 11 in order to protect Zohar I and Patriarch from the efforts of MBIA Inc. and MBIA Insurance Corp. to obtain Zohar I’s assets for itself.

Patriarch also said the filing will have no effect on the operations of the portfolio companies whose loans are held by Zohar I, and the filing does not trigger any defaults on portfolio company loans.

In addition, Patriarch said neither Zohar II 2005-1, Ltd. nor Zohar III, Ltd., two additional investment funds managed by Patriarch and some of its affiliates, are part of the filing. They will not be subject to any cross-defaults.

“This is a matter between two creditors that can be, and will be, resolved in a forum other than a bankruptcy court – the one forum the Zohar entities were deliberately and carefully structured to avoid and which all holders of notes, including Patriarch XV, agreed to avoid,” the motion added.

The Chapter 11 case number for Grand Cayman, Cayman Islands-based Zohar is 15-23680.

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