Zohar: Tilton seeks OK of portfolio company monetization process

By Caroline Salls

Pittsburgh, Dec. 24 – Zohar III, Corp. former director and portfolio companies’ manager equity holder Lynn Tilton filed a motion on Monday with the U.S. Bankruptcy Court for the District of Delaware seeking approval of her proposed procedures for the monetization of Zohar’s remaining group A portfolio companies.

Tilton said she still actively manages Zohar’s four most profitable portfolio companies as their chief executive officer.

“The timeline proposed in this motion rightly balances the interests of a timely process with the goal of maximizing the value of the debtors’ assets for the benefit of all stakeholders,” Tilton said in the motion.

Although the heavily redacted motion does not publicly disclose the proposed sale timeline, Tilton said it is structured to allow her and the Zohar debtors to complete the monetization of the portfolio companies in accordance with a previously announced settlement.

Tilton’s proposed procedures also sets guidelines for when the parties may involve the court to settle any disputes related to the monetization process. Those guidelines were also redacted from the motion.

As previously reported, on Dec. 19, the U.S. District Court for the District of Delaware denied a motion filed by Tilton and the Patriarch stakeholders seeking a stay of an order that allows Zohar’s asset monetization efforts to continue.

Following mediation, a settlement reached by the Zohar debtors, Tilton, Patriarch and its affiliates, MBIA and the Zohar III controlling class was approved by the bankruptcy court in May 2018. In addition, Tilton was replaced as Zohar’s sole director.

The district court said a key component of the settlement was the establishment of a monetization process to unlock the value of the Zohar debtors’ interests in the portfolio companies.

The settlement also provided for a 15-month armistice that would have been extended if proceeds in the monetization process were generated to pay 50% of the amounts owed to the Zohar Funds’ noteholders, but the proceeds did not exceed that amount, and the armistice period expired on Sept. 30.

Tilton subsequently contended that the monetization process should end with the expiration of the armistice, while the company argued that the settlement allowed the monetization process to continue beyond the expiration date.

However, the stay order said the bankruptcy court ruled that “[t]he plain terms and the clear limits that are set forth in the settlement agreement demonstrate to the court that the parties did not intend for the monetization process to end at the conclusion of the 15-month window.”

Tilton and Patriarch appealed that ruling.

Zohar is a Grand Cayman, Cayman Islands-based collateralized debt obligation. The company filed bankruptcy on March 11, 2018 under Chapter 11 case number 18-10512.

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