MatlinPatterson Puts Two Funds in Bankruptcy to Fend Off Foreign Litigation – The Wall Street Journal

Distressed-investment manager MatlinPatterson Global Advisers LLC placed two of its funds in bankruptcy in an effort to shield their assets from foreign litigation while it liquidates them and returns the proceeds to investors.

Wednesdays bankruptcy filing covers MatlinPatterson Global Opportunities Partners II LP, as well as an affiliated Cayman Islands fund, which face legal actions in Brazil that have prevented them from returning money to investors, according to papers filed in the U.S. Bankruptcy Court in New York.

The funds raised $1.65 billion, primarily from insurance companies, pension funds and other institutional investors to invest in financially distressed companies across industries including chemicals, security, fashion, and electronics, according to a declaration filed by the funds chief restructuring officer Matthew Doheny.

Beginning in 2013, MatlinPatterson began to wind up the funds, liquidating their investments to return money to their investors. As of June 30, the funds had approximately $142 million in cash, held in bank accounts in the U.S., and $58 million of debt in the form of intercompany promissory notes, Mr. Doheny said.

The two funds are facing an arbitration award against them in Brazil that has been upheld by a Cayman Islands court. The funds are also targets of litigation over their former Brazilian investment vehicle, as well as an enforcement proceeding in a Brazilian court based on an allegation they were responsible for the disappearance of some money in a Brazilian bankruptcy proceeding, according to Mr. Doheny.

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MatlinPatterson Puts Two Funds in Bankruptcy to Fend Off Foreign Litigation - The Wall Street Journal