Highland Capital Management L.P., a unit within Highland Capital Management’s alternative investment platform, voluntarily filed for Chapter 11 bankruptcy on Wednesday.
HCMLP’s filing stems from a potential judgment being sought against it that could exceed the entity’s liquid assets, the firm said in a prepared statement. Highland disputes the judgment’s liquid claims, Highland wrote in the release.
The potential judgment is connected to a financial crisis-era fund that was previously managed by HCMLP, which has has been in liquidation since 2011. As part of the liquidation plan, a committee of fund investor representatives, called the “Redeemer Committee of the Highland Crusader Fund” was formed to coordinate the liquidation process.
Highland noted in its news release that between 2011 and 2016, HCMLP distributed more than $1.55 billion of the original account balance of about $1.7 billion. With more than 90 percent of the liquidation process completed, the Redeemer Committee filed a complaint against the HCMLP related to a contract dispute over the timing of management fees and other claims, Highland said.
“In consideration of its liquidity profile,” Highland wrote in the release, “HCMLP determined that it was necessary to commence the voluntary Chapter 11 proceedings at this time.”
In the bankruptcy filing, the Redeemer Committee is listed as HCMLP’s largest unsecured creditor with a disputed claim of more than $189 million.
The filing lists the estimated number of creditors between 200 and 999 – a comprehensive list can be found here.
HCMLP’s estimated assets were listed as between $100 million and $500 million, as were its estimated liabilities.
Highland noted that during HCMLP’s Chapter 11 proceedings, investment and business activities are operating normally and are continuing without disruption. Highland also added that it “does not anticipate any employment or management changes at HCMLP or elsewhere across the platform.”
Highland was founded in 1993 and counts NexPoint Funds and Highland Brasil among its affiliates.
The firm’s affiliates have been active in the Dallas market as of late with NexPoint Realty Advisors’ purchase of the iconic Cityplace Tower last year. The firm announced in August NexPoint’s redevelopment of the office tower would include a 223-key InterContinental Hotels & Resorts branded property spanning eight floors, in addition to other upgrades like concourse-level food and retail and a new fitness center.
Highland announced last month that co-founder Mark Okada would retire at the end of this year, while James Dondero, who founded the firm with Okada, will continue to oversee Highland and its affiliates once Okada steps down. Okada remains in a senior advisory role through the end of the year. He’ll also retain his ownership stake after his retirement.
In its latest regulatory filing, Highland held just under $2 billion in domestic equities as of June 30.