GRAPEVINE, Texas, Oct. 25, 2023 (GLOBE NEWSWIRE) — United Development Funding IV (“UDF IV” or the “Trust”) announced that it recommends Trust shareholders reject the ninth extended unsolicited tender offer made by hedge fund NexPoint Strategic Opportunities Fund (“NexPoint”) to purchase all Trust common shares (the “Shares”) for $1.10 per share (the “Tender Offer”). The Trust’s Board of Trustees (the “Board”) believes that NexPoint’s extended tender offer price of $1.10 per share represents a substantial discount to the Trust’s current value, and that other factors also lead to the conclusion that shareholders should reject the Tender Offer. As of December 31, 2020, the Trust’s book value was $13 per share, as reflected in the unaudited balance sheet as of that date included in the Trust’s August 2023 letter to Trust shareholders.
Shareholders should be aware that they are not required to tender any Shares to NexPoint. To reject the Tender Offer, a shareholder should simply ignore it. A shareholder that has already agreed to tender its Shares pursuant to the Tender Offer may withdraw any tender of shares up until October 29, 2023 (as described in the Tender Offer materials). A copy of this press release will be posted to the Trust’s website at www.udfiv.com. The Trust requests that a copy of this press release also be included with all distributions of materials relating to the Tender Offer.
The Board has reviewed the terms and conditions of the ninth extended Tender Offer, considered other information relating to the Trust’s portfolio of assets, current financial condition and future opportunities and evaluated various other factors it deemed relevant, such as its knowledge of NexPoint and its affiliates, including NexPoint Advisors, L.P., Highland Capital Management, L.P. (“Highland” or the “Debtor”) and NexPoint’s portfolio manager, James Dondero (collectively, “NexPoint/Dondero”). As indicated above, the Board believes that the Tender Offer price of $1.10 per share represents a substantial discount to the Trust’s current value.
In addition, the Board has serious concerns that the principal interests of NexPoint/Dondero and their affiliates in taking over the Trust may be to shield the participants in the illegal short and distort fraud scheme perpetrated against the Trust by hedge fund manager J. Kyle Bass. Finally, the Trust has concerns arising from the lack of answers from NexPoint to specific questions posed by the Trust since July 2020 seeking information about NexPoint/Dondero’s relationships with J. Kyle Bass and NexPoint/Dondero’s intentions with respect to the Trust. These concerns and the Board’s additional reasons for recommending that shareholders reject the Tender Offer are described further in the Trust’s prior press releases recommending shareholders reject the Tender Offer, which are available at www.udfiv.com.
The Board also considered recent developments in litigation between NexPoint/Dondero and the Trust, including the 48th Judicial District Court ruling in favor of the Trust granting the Trust’s motion to dismiss the defamation lawsuit brought by NexPoint Advisors, L.P. against the Trust, and the pending books and records action NexPoint brought against the Trust in Maryland in June 2023. In the Board’s opinion, both of these lawsuits are further evidence of James Dondero’s willingness to waste NexPoint assets and resources and focus on vexatious litigation.
The Board also considered more recent developments in the Highland bankruptcy case before the U.S. Bankruptcy Court for the Northern District of Texas (the “Court”), which the Court has described as “very much like a nasty divorce” including, among other things, the Court’s order that Dondero be held in civil contempt for his violation of prior Court orders as well as fines imposed against Dondero for his non-compliance with prior Court orders.
On October 15, 2023, the litigation trustee for a litigation trust established with respect to the Highland bankruptcy filed a complaint alleging Dondero “hopelessly commingled and exploited entities within his enterprise for his own personal benefit.” Specifically, the complaint alleges Dondero (1) caused Highland to pay tens of millions of dollars to or for the benefit of Dondero and his affiliates in order to evade creditors, (2) caused Highland to transfer assets to other Dondero entities for less than the assets’ reasonably equivalent value, (3) caused Highland to exact vendettas on employees he perceived as disloyal, (4) used Highland as a vehicle to fraudulently induce an investment of approximately $75 million into another Dondero entity, (5) caused the fraudulent transfer of assets worth at least $100 million out of two Highland-managed funds, (6) disregarded Highland’s contractual and fiduciary obligations to investors and (7) siphoned funds out of Highland for use by other Dondero entities in exchange for artificially low interest, long-term notes that Dondero later purported to extend (by 30 years) or retroactively forgive, all for no consideration to Highland. The complaint further alleges that Dondero’s companies “were operated and controlled for Dondero’s benefit, with Dondero utilizing complex corporate structures and transactions to transfer money and assets between the various Dondero entities in the manner he viewed most advantageous to his own bottom line.”
The Board further observed that none of these significant events regarding the Highland bankruptcy proceeding have been disclosed to Trust shareholders by NexPoint in the Tender Offer materials.
Highland Capital filed for bankruptcy in October 2019 and James Dondero ceded control over the bankrupt firm in January 2020 as part of a deal with creditors. The case and associated proceedings are Highland Cap. Mgmt., L.P. v. Highland Cap. Mgmt. Fund Advisors, L.P., Bankr. N.D. Tex., 19-34054, Highland Capital Management L.P. vs Highland Capital Management Fund Advisors, L.P., NexPoint Advisors, L.P., Highland Income Fund, NexPoint Strategic Opportunities Fund, et al, N.D. Tex., Adv. Proc. No. 21-03000 and Highland Cap. Mgmt., L.P. v. Dondero, Bankr. N.D. Tex., Adv. Proc. No. 20-3190, hearing 3/24/21.
About United Development Funding IV
United Development Funding IV is a Maryland real estate investment trust. UDF IV was formed primarily to generate current interest income by investing in secured loans and producing profits from investments in residential real estate. Additional information about UDF IV can be found on its website at www.udfiv.com. UDF IV may disseminate important information regarding its operations, including financial information, through social media platforms such as Twitter, Facebook and LinkedIn.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements relating to United Development Funding IV and the Tender Offer that are based on management’s current expectations and estimates and are not guarantees of future performance or future events. Such forward-looking statements generally can be identified by our use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “anticipate,” “estimate,” “believe,” or other similar words. Readers should be aware that there are various factors, many of which are beyond the Trust’s control, which could cause actual results to differ materially from any forward-looking statements made in this correspondence. Accordingly, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this correspondence. Forward-looking statements in this document speak only as of the date on which such statements were made, and the Trust undertakes no obligation to update any such statements that may become untrue because of subsequent events.
