Wall Street financier Lynn Tilton has agreed to open talks with bond insurer MBIA Inc. that could lead to a big change in her role at the collateralized loan funds that feed cash to her $2.5 billion distressed-debt empire, the Wall Street Journal reported today. Tilton and MBIA will discuss options including the appointment of an independent fiduciary to serve as collateral manager for three collateralized loan obligations (CLOs) dubbed Zohar I, II and III, a bankruptcy court judge said yesterday. The CLOs provide funding for the companies she owns. The announcement came at a bankruptcy court hearing in White Plains, N.Y., where Tilton and MBIA clashed over how to resolve the financial problems that erupted when Zohar I defaulted last year and the bond insurer covered the default. Tilton filed an involuntary bankruptcy case for Zohar I late last year, saying that she needed to protect it from MBIA. Joined by Cayman Islands trustees, MBIA opposed the involuntary bankruptcy and has asked that it be dismissed.
