U.S. private equity firm Patriarch Partners LLC said on Sunday it filed to put the Zohar I debt fund into chapter 11 bankruptcy to protect against efforts by MBIA Inc. to obtain the assets of Zohar, which invests in Patriarch's portfolio companies, Reuters reported yesterday. Patriarch Chief Executive Officer Lynn Tilton created the Zohar I fund in 2003, and Patriarch is the fund's largest creditor, holding $286.5 million of its notes. MBIA is another Zohar I creditor, Patriarch said. Rather than have Zohar file a voluntary bankruptcy petition, Patriarch filed what is known as an involuntary bankruptcy against Zohar because Patriarch no longer controls the fund. MBIA took control after Zohar defaulted on $149 million of notes on Friday. Those notes were insured by MBIA. The U.S. Securities and Exchange Commission (SEC) has accused Tilton and Patriarch of fraud related to the Zohar loan funds. That case has been put on hold by a federal appeals court.
