DALLAS, Jan. 16, 2020 – HCMLP Reports on Reorganization Proceedings, Shares Information on Agreement with Creditors’ Committee and Related Governance Changes
Highland Capital Management, L.P. (“HCMLP”), an investment adviser on the Highland Capital Management investment platform (“Highland”), provided an update today on its Chapter 11 reorganization proceedings in the U.S. Bankruptcy Court for the Northern District of Texas (the “Court”).
Background on HCMLP’s Reorganization
On October 16, 2019, HCMLP commenced a voluntary reorganization process, filing a petition for relief under Chapter 11 of the U.S. Bankruptcy Code.
HCMLP is a single entity on the Highland platform and, as noted in the original press release announcing the filing, is the only entity that initiated reorganization proceedings. None of the other entities on the platform, including without limitation Highland Capital Management Fund Advisors, L.P. (“HCMFA”), NexPoint Advisors, L.P. (“NexPoint”), and NexPoint Real Estate Advisors, L.P. (“NREA”), have filed for bankruptcy. Charitable giving vehicles and entities supporting community foundations are not subject to the filing.
HCMLP’s filing stems from a potential judgment against the entity related to a financial-crisis-era hedge fund formerly managed by HCMLP that has been in liquidation since 2011. The potential judgment against HCMLP could exceed HCMLP’s liquid assets. While HCMLP has disputed the underlying claims, it initiated the reorganization proceedings to manage this liquidity dynamic.
Through the Court-supervised process, HCMLP seeks to consolidate outstanding litigation, manage liquidity for the purpose of preserving value, and arrive at a reorganization plan in an efficient, orderly manner.
Update on Recent Events in Reorganization Proceedings
On January 9, 2020, the Court approved an agreement between HCMLP and the committee of unsecured creditors (the “Committee”). Prepared by the two parties and submitted to the Court for approval, the agreement instituted certain governance changes at HCMLP and its general partner, Strand Advisors, Inc. (“Strand”). Among the changes was the formation of a new independent board of directors at Strand (the “Independent Board”), which will oversee operations at HCMLP for the remainder of the reorganization process.
HCMLP and the Committee mutually agreed on the individuals appointed to the Independent Board. The three individuals selected have knowledge and professional expertise relevant to HCMLP, with collective experience in the investment management industry, as well as in corporate restructurings and reorganizations. HCMLP believes this oversight will promote efficiency in the reorganization process and facilitate business and investment operations both at HCMLP and across the Highland platform.
In conjunction with the formation of the Independent Board, James Dondero resigned from his officer and director roles at both Strand and HCMLP. Mr. Dondero, however, remains an HCMLP employee. He also maintains his portfolio management roles at HCMLP with respect to all funds and investment vehicles for which he serves as portfolio manager, subject to the supervision and control of the Independent Board.
This agreement is a positive development in HCMLP’s reorganization process. The governance framework promotes continuity in HCMLP’s business and investment activities, while advancing the process toward a plan with the goal of preserving value for all constituents.
Clarification on HCMLP Governance Changes, Impact to Other Entities on Investment Platform
The governance changes at HCMLP and Strand took effect on January 9. Since then, investment and business activities at those entities and across the broader platform have continued without interruption.
The governance changes are limited to HCMLP and Strand, its general partner. The governance structures at other entities on the platform, including without limitation HCMFA, NexPoint, NREA, and all funds and accounts advised by those entities, are unchanged. Mr. Dondero’s roles at those entities are unaffected.
About Highland Capital Management, L.P. (HCMLP)
Highland Capital Management, L.P. (“HCMLP”) is an SEC-registered investment adviser on Highland Capital Management’s global alternative investment platform. HCMLP serves as the adviser to certain institutional funds and accounts.
About Highland Capital Management
Highland Capital Management (“Highland”) is a multibillion-dollar global alternative investment platform. Established in 1993 with a focus on the leveraged loan market, Highland has evolved over its more than 25-year history, building on its credit expertise and value-based approach to expand into other asset classes. Today, in addition to high-yield credit, Highland’s investment capabilities include real estate, private equity and special situations, public equities, structured credit, and sector- and region-specific verticals built around specialized teams. The platform serves both institutional and retail investors worldwide, offering access to alternatives in a range of investment vehicles and fund structures. Highland operates globally, with offices in Dallas, Texas (headquarters), Buenos Aires, Rio de Janeiro, Singapore, and Seoul. For more information visit www.highlandcapital.com.