(Reuters) — U.S. private equity firm Patriarch Partners LLC said on Sunday it has filed for Chapter 11 bankruptcy protection for Zohar I to protect the debt fund against efforts by MBIA Inc and MBIA Insurance Corp to obtain its assets.
“We believe the Chapter 11 process now presents the best way for Zohar I to restructure its finances while preserving the value of the portfolio companies it owns on behalf of its key stakeholders,” Patriarch Chief Executive Officer Lynne Tilton said in a statement.
Patriarch is Zohar I’s largest creditor, holding $286.5 million of its notes, the statement said. MBIA is another Zohar I creditor, Patriarch said.
Patriarch is seeking court approval for a reorganization plan that will repay MBIA in full, while “maximizing value” for Patriarch, said Tilton, alleging MBIA has acted in “bad faith” in restructuring discussions.
MBIA did not respond immediately for comment.
The U.S. Securities and Exchange Commission (SEC) has accused Tilton and Patriarch of fraud related to the Zohar collateralized loan funds. That case has been put on hold by a federal appeals court.
Tilton is known as the “Diva of Distressed” for her efforts to turn around troubled companies.
The Zohar funds are three collateralized loan obligation funds, that have raised more than $2.5 billion from investors used to make investments to distressed companies, according to the SEC complaint.