Zohar III U.S. Trustee asks court to appoint trustee to oversee case

By Caroline Salls

Pittsburgh, April 3 – The U.S. Trustee overseeing Zohar III Corp.’s Chapter 11 case asked the U.S. Bankruptcy Court for the District of Delaware to order appointment of a Chapter 11 trustee or an examiner for the case, according to a motion filed Tuesday.

Acting Region 3 U.S. Trustee Andrew R. Vara said in his motion that cause exists to appoint a Chapter 11 trustee “because the debilitating and entrenched acrimony among the debtors and their creditors, including MBIA Insurance Corp., the Zohar III controlling class and Alvarez & Marsal Zohar Management, LLC is impeding the reorganization process.”

Vara said appointment of a trustee “may be the only effective way to pursue reorganization.”

According to the motion, appointment of a Chapter 11 trustee would also be in the best interests of creditors, equity security holders and other interested parties because Zohar’s director “has exhibited a lack of diligence and an inability to fulfill the fiduciary duties imposed on management of a Chapter 11 debtor-in-possession.”

“Given the record, the U.S. Trustee lacks confidence in the debtors’ sole director’s ability to faithfully and competently fulfill the statutory and fiduciary duties of a Chapter 11 debtor-in-possession,” the motion said.

Vara requested appointment of an examiner as an alternative to the trustee appointment request.

Zohar is a Grand Cayman, Cayman Islands-based collateralized debt obligation. The company filed bankruptcy on March 11 under Chapter 11 case number 18-10512.

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