Turnaround queen Lynn Tilton is racing the clock.
With one of her funds facing a deadline to repay investors in just two weeks, Tilton is suing the insurance company that backed it.
Tilton — who is being sued by the Securities and Exchange Commission for allegedly overcharging investors in a separate case — claims MBIA tricked her Patriarch Partners into buying back $100 million of the notes supporting her $180 million Zohar I fund. She wants that $100 million back.
MBIA has insured more than $1 billion in two Zohar funds and will be on the hook if they can’t pay back noteholders. The first one matures Nov. 20, and a default could hit the second fund, according to the suit filed in New York state court.
Patriarch has been trying to reorganize the funds since 2012, which MBIA agreed was necessary to protect its own interests, the suit claims.
MBIA told the buyout firm it would need to buy out a noteholder of $100 million for the restructuring to go forward, but just days later MBIA reneged in “an elaborate ruse” to control the restructuring, according to the suit.
MBIA said, “The allegations are wholly without merit.”