Patriarch Partners Founder Lynn Tilton can’t block a planned sale of assets in one of her former investment funds, a deal she claims was structured to benefit insurer MBIA Inc., Bloomberg News reported yesterday. U.S. District Judge Jed Rakoff yesterday denied Tilton’s request to bar the sale of collateral in the Zohar I distressed loan fund pending the outcome of her lawsuit against the trustee of the fund, U.S. Bank NA, and MBIA. The judge ordered the trustee to issue another notice about the auction on Oct. 24 and to keep the sale open at least until Nov. 23. Tilton sued the trustee and the insurer in September, arguing that the auction is structured solely for the benefit of Purchase, New York-based MBIA, which holds a $149 million claim on the collateral. She won an initial court order barring the sale temporarily and sought a permanent ruling.MBIA argued that Zohar I defaulted on its payments in November 2015, obligating the company to repay the $149 million to noteholders. The default allowed MBIA to instruct the fund’s trustee to sell the collateral, the insurer said. Judge Rakoff’s two-page ruling follows Tilton’s decision to drop a lawsuit seeking to halt an SEC probe into allegations she overcharged investors in loan securities.
