Lynn Tilton reached settlements with creditors of the $2.5 billion Zohar funds she created, a legal cease-fire that comes after the turnaround executive placed the troubled investment vehicles in bankruptcy, WSJ Pro Bankruptcy reported. The settlement framework will keep the three Zohar funds — collateralized loan obligations that raised money for Tilton’s collection of troubled businesses — in bankruptcy while monetizing the loans they made to companies, according to papers filed with the U.S. Bankruptcy Court in Wilmington, Del. Money from the Zohar funds had fueled portfolio companies run by Tilton such as fire engine manufacturer American LaFrance and aerospace manufacturer MD Helicopters Inc. She said she placed Zohar I, Zohar II and Zohar III in bankruptcy to make the most of those businesses, though investors who backed her disagreed with her motives and wanted her replaced by an outside bankruptcy trustee. The first two Zohar funds have defaulted, leaving guarantor MBIA Insurance Corp. on the hook to make up the difference to creditors. Investors are counting on the third, which matures in April 2019, to make good on what it owes. Tilton filed the bankruptcy case shortly before the Delaware Supreme Court was expected to decide whether she owned three businesses that the Zohar funds’ manager Alvarez & Marsal said were rightfully theirs.
