Highland Capital Management, a Dallas-based alternative investment platform, announced that Highland Capital Management L.P. (HCMLP), an investment adviser entity within its platform, has filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware. No other Highland or NexPoint affiliate has filed for bankruptcy protection.
Highland Capital Management disputes the underlying claims of the bankruptcy filing, which stems from a pending judgment against HCMLP, that if confirmed, could exceed HCMLP’s liquid assets.
The potential judgment relates to a fund previously managed by HCMLP called the Highland Crusader Fund, which closed in 2008 during the financial crisis and has been in liquidation since 2011. According to Reuters, “Highland owes a disputed $189.3 million in debt to a committee of Crusader Fund investors.”
“Rather than liquidating the fund at the height of the crisis for pennies on the dollar, HCMLP carried out a liquidation process over time to maximize recoveries for investors,” the company said in a statement.
The liquidation plan, which was finalized and approved by investors and HCMLP in 2011, established a committee of fund investor representatives to coordinate the liquidation process. Between 2011 and 2016, HCMLP said that it distributed more than $1.55 billion of the original account balance of approximately $1.70 billion.
At that point, with more than 90 percent of the liquidation process completed, the committee filed a complaint against HCMLP resulting from a contract dispute over the timing of management fees and other related claims, the company said. Highland maintains that HCMLP acted in the interest of investors and disputes the committee’s claims.
“Today’s filing does not encumber any of the NexPoint real estate network operations,” said Matt McGraner, NexPoint Real Estate Advisors chief investment officer. “We continue to focus on building value through our investment and business activities, which are driven by the strong relationships we have across management teams, capital markets partners, lenders, and vendors.”
The Highland investment platform is comprised of a number of investment advisers, broker dealers, and other related entities, and HCMLP is the only entity on the platform that has filed for Chapter 11 protection.
Entities on the Highland investment platform include Highland Capital Management Fund Advisors L.P. (HCMFA), NexPoint Advisors L.P., NexPoint Real Estate Advisors L.P., and NexPoint Securities Inc., as well as all HCMFA-, NexPoint-, and NREA-advised funds.
Highland said that investment and business activities on the platform are operating in the ordinary course and does not anticipate any employment or management changes at HCMLP or elsewhere across the platform.
The Highland platform was established in 1993 and operates a diverse investment platform, serving both institutional and retail investors worldwide. In addition to high-yield credit, Highland’s investment platform includes public equities, real estate, private equity and special situations, structured credit, and sector- and region-specific verticals built around specialized teams. Highland is headquartered in Dallas, Texas and maintains offices in Buenos Aires, Rio de Janeiro, Singapore, and Seoul.