CLO primary action quiet; supply expected over month; Patriarch steps down from funds

By Cristal Cody

Tupelo, Miss., Feb. 5 – CLO primary action remains nearly at a standstill year to date, but several deals are expected to price in the U.S. and European markets over the month.

CreekSource LLC is marketing $300 million of notes in the Mill Creek CLO II, Ltd./Mill Creek CLO II LLC transaction via Goldman Sachs & Co.

Also, Prudential Investment Management, Inc. plans to price $507.75 million of notes in the Dryden 42 Senior Loan Fund/Dryden 42 Senior Loan Fund LLC transaction. BNP Paribas Securities Corp. is the placement agent.

In other market activity, Lynn Tilton, chief executive officer of Patriarch Partners, LLC, announced Patriarch Partners will step down as collateral manager of three funds following years of litigation with bond insurer MBIA Inc.

The new collateral manager for Zohar CDO 2003-1, Ltd., Zohar II 2005-1, Ltd. and Zohar III, Ltd. has not been announced yet.

“The constant litigation between Patriarch and MBIA that began in 2009 and continues today has created an unproductive and untenable relationship between parties who by definition should be aligned,” Tilton said in a news release on Friday.

Along with the resignation, Patriarch Partners XV, LLC, the largest creditor of Zohar CDO 2003-1, will withdraw its opposition to dismiss the involuntary Chapter 11 cases that it filed for Zohar I.

Tilton said in the release that she and her firm will operate as a family office and private equity company for the more than 70 companies spread across 14 industry sectors in the Patriarch portfolio.

The Securities and Exchange Commission announced in March fraud charges against Tilton and Patriarch Partners over hiding the poor performance of loan assets in the Zohar funds.

More than $2.5 billion was raised from investors for the three CLO funds, which have portfolios comprised of loans to distressed companies.

A federal appeals court put the case on hold in September.

Patriarch Partners is a New York City-based investment firm.

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