Lynn Tilton: the Diva of Distressed Debt

Controversial private-equity investor Lynn Tilton is hoping Donald Trump will soften up America's financial regulator.


Lynn Tilton: best known for her "hypersexual" persona

"Lynn Tilton is hoping for a little love from the Trump administration", says The New York Post. The private-equity investor known as "the Diva of Distressed Debt" has been embroiled in a fraud case with the SEC, the regulator, for the past two years, and she's banking on it being a little bit more "reasonable" under Donald Trump. There's a lot at stake.

If the allegations against her are proven, Tilton faces a lifetime ban from the securities industry a considerable blow to someone whose stated "mission" is to preserve manufacturing jobs across America, says Bloomberg. Tilton views herself as an "anti-Gordon Gekko" a "saviour" of troubled companies. The SEC's contention is "she enriches herself first, while wrapping herself in the flag".

Tilton's firm, Patriarch Partners, is credited with inventing the collateralised loan obligation (CLO) market in the early 2000s bundling loans to troubled companies and turning them into investment-grade securities. Hedge-fund clients have been lavish in their praise of her. "She's brilliant. Like extraordinarily intelligent. She knows how to make money", says one. But Tilton, 57, has always been best known for her aggressively "hypersexual" persona.

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"Stories of her antics squeezing the derrires of male colleagues, coming up behind them and sticking her tongue in their ears are legendary". She once sent out a Christmas card to clients with a photo of herself dressed as a dominatrix on the cover. "It was all part of the game," says Tilton who, after studying at Yale, started out as investment banker at Morgan Stanley and Goldman Sachs. And it made her very rich, notes She built Patriarch into a colossus, managing billions in loan investments and which, at its peak, owned 74 industrial companies outright.

Tilton's message has got somewhat fluffier since her run-in with the SEC which alleges she defrauded investors in three CLO funds called Zohar I, II, and III by misreporting loans as "performing" while pocketing $200m in bogus fees, says Bloomberg.

Maintaining she is the victim of an "unconstitutional" kangaroo court (her case is being tried by an SEC administrative law judge rather than in a regular court), Tilton has run "a social media campaign unprecedented in the history of financial regulation" to highlight her struggle. "Streams of consciousness radiate from Twitter at all hours of the day" (#FightForTruth #JusticeForLynn, etc).

"We've saved 700,000 jobs in this country. No one will ever take that from me." It sounds like the sort of PR that would appeal to Trump all the more so since Tilton is battling an SEC court structure brought in by the Dodd-Frank reforms he hopes to overturn. But even assuming she wins this one, she's by no means out of the woods, says Dealbreaker.

Last month, disgruntled Zohar investors launched their own lawsuit, claiming Tilton "pillaged more than $1bn through her labyrinthine control of the companies she managed". It may take a more than a few boasts and tweets to get out of that one.