A total of 133 line items of assets in the Zohar I CLO which was formerly managed by Patriarch Partners are set to be auctioned this Friday, Dec. 9 at noon EDT, according to a notice from the trustee, U.S. Bank.
You can download a pdf of the assets here.
Duff & Phelps Securities LLC will serve as the liquidation agent.
The auction is expected to shed some light on the value of assets on privately held issuers that in some instances were among the former collateral manager Patriarch’s many portfolio companies. The internal valuation methods employed by Patriarch on its three Zohar CLOs had previously garnered the attention from the Securities and Exchange Commission (SEC), which in March 2015 brought fraud charges against the manager and Patriarch’s CEO and founder, Lynn Tilton.
The Zohar I CLO had previously defaulted on Nov. 22, 2015, and Alvarez & Marsal Zohar Management took over as collateral manager on all three of the Zohar CLOs in February from Patriarch.
The securities to be auctioned include the term loans and equity interests in a number of companies that are privately owned, in some instances by Patriarch Partners themselves such as MD Helicopters, Inc.; Duro Textiles, LLC; and Xinhua Sports & Entertainment.
Interested investors can have the opportunity to meet with the management of the companies for sale subject to a confidentiality agreement by contacting the liquidation agent, Duff & Phelps.
U.S. Bank notes that there is still ongoing litigation across different courts creating uncertainty over the actual rights or transferability of the assets for sale. Those cases include Patriarch Partners Agency Services LLC v. Zohar CDO 2003-1 in the Southern District Court of New York. Patriarch Partners is claiming in its suit that under the governing documents, Patriarch’s removal as an administrative agent was invalid and therefore the sale of assets cannot be conducted.
Potential investors must also be wary that they may not have the full purview of the collateral in the Zohar I CLO. Alvarez & Marsal as collateral manager is also in litigation against Patriarch in the Delaware Court of Chancery in Zohar CDO 2003-1 v. Patriarch Partners LLC, claiming that Patriarch is still withholding critical documents providing more details about the holdings of the Zohar CLOs after it resigned as collateral manager on all of them.
Patriarch Partners also filed for an appeal on Nov. 28 to the Supreme Court of Delaware arguing that the trustee, U.S. Bank, has no right to transfer the equity interests of a number of private companies in the Zohar CLOs.
MBIA, who serves as a guarantor on the Zohar I CLO, is expected to use the proceeds from the sale towards paying its expected upcoming claims on the Zohar II CLO which matures on Jan. 20, 2017 (subscriber link) that it is also on the hook to insure. — Andrew Park
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