The Zohar Funds, Lynn Tilton, MBIA, and the Zohar III Noteholders Announce Resolution to Stay Litigation, Refinance and Monetize Zohar Assets

Zohar CDO 2003-1, Zohar CDO 2003-1 Corp., Zohar II 2005-1, Limited, Zohar II 2005-1 Corp., Zohar III, Limited, and Zohar III, Corp. (collectively, the "Zohar Funds"), Lynn Tilton, MBIA Insurance Corporation, a wholly owned subsidiary of MBIA Inc. MBI, and the Zohar III Controlling Class of Noteholders jointly announce today that the parties have mutually resolved the motions pending in federal Bankruptcy Court in the District of Delaware relating to the Zohar Funds, and have agreed to a deal that will include a stay of all pending litigation between the parties. This agreement is intended to facilitate the refinancing and monetization of assets of the Zohar Funds to the benefit of all stakeholders, and the parties have agreed to work in a mutually cooperative process in support of such refinancing and monetization.

As part of the agreement, an Independent Director will be appointed to govern the Zohar Funds, along with a Chief Restructuring Officer, who together with Ms. Tilton as director and manager of each Portfolio Company, will jointly implement the refinancing and monetization process. During the process, Ms. Tilton will remain in her current roles at the Portfolio Companies, all litigation between the parties will be stayed for a minimum of 15 months, and the bankruptcy cases will proceed without the appointment of a Trustee.

Ms. Tilton stated, "This agreement is a meaningful and important step towards allowing the Zohar Funds to monetize and refinance their assets in order to pay off all creditor claims in full. It is in the best interest of all stakeholders that we lay down our swords and stop the years of damaging litigation in order to maximize value for all of the Funds' stakeholders."

Anthony McKiernan, Chairman of MBIA Insurance Corporation, stated that "MBIA is pleased that the parties have been able to come to a consensual agreement that will put in place a process to enable MBIA to recover on the significant amounts it has paid its policyholders."

Marc Kirschner of Goldin Associates, Chief Restructuring Officer of the Zohar Funds, added, "The resolution of the hotly contested litigation in the bankruptcy cases is in the best interests of the Zohar Funds and their stakeholders as it will pave the way for the Zohar Funds to maximize the value of their assets for the benefit of all. The mediated result was the culmination of significant negotiations and the Zohar Funds are deeply appreciative of the efforts of the mediator, Judge Kevin Gross, for facilitating a settlement of the pending matters, which was no simple task."

Today's agreement will have no immediate effect on the operations of the Portfolio Companies to whom the Zohar Funds have made senior secured loans. The Portfolio Companies will continue to operate their businesses in the ordinary course as they are not parties to these bankruptcy cases.

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