United Development Funding IV recommends shareholders
GRAPEVINE, Texas, October 25, 2021 (GLOBE NEWSWIRE) – United Development Funding IV (“UDF IV” or the “Trust”) has announced that it recommends that Trust shareholders reject the proposed ninth unsolicited takeover bid by the NexPoint Strategic Opportunities Fund (“NexPoint”) to purchase all of the common shares of Trust (the “Shares”) at a price of $ 1.10 per share (the “Takeover Bid”). TThe Board of Directors of the Trust (the “Board”) believes that NexPoint’s extended tender offer price of $ 1.10 per share represents a substantial reduction from the current value of the Trust, and that other factors also lead to the conclusion that shareholders should reject the takeover bid. As at December 31, 2020, the book value of the Trust was $ 13 per share, as evidenced by the unaudited balance sheet at that date included in the August 2021 letter from the Trust to the shareholders of the Trust.
Shareholders should be aware that they are not required to tender shares to NexPoint. To reject the Takeover Bid, a shareholder must simply ignore it. A shareholder who has already agreed to tender his shares under the tender offer may withdraw any share offer until October 29, 2021 (as described in the tender offer documents) . A copy of this press release will be posted on the Trust’s website at www.udfiv.com. The Trust requests that a copy of this press release also be attached to all distributions of documents relating to the tender offer.
The Board of Directors has reviewed the terms and conditions of the Ninth Extended Takeover Bid, reviewed other information relating to the Trust’s portfolio of assets, the current financial condition and future opportunities, and assessed various other factors it has deemed relevant, such as its knowledge of NexPoint and its affiliates. , including NexPoint Advisors, LP, Highland Capital Management, LP (“Highland” or the “Debtor”) and NexPoint’s portfolio manager, James Dondero (collectively, “NexPoint / Dondero”). As indicated above, the Council considers that the tender offer price of $ 1.10 per share represents a substantial reduction from the current value of the trust.
Further, the Board of Directors has serious concerns that the primary interests of NexPoint / Dondero and their affiliates in the takeover of the Trust may be to protect participants in the illegal short-term fraud and distortion scheme perpetrated against the Trust by hedge fund manager J. Kyle Bass. . Finally, the Trust is concerned about the lack of responses from NexPoint to specific questions posed by the Trust since July 2020 to obtain information on NexPoint / Dondero’s relationship with J. Kyle Bass and NexPoint / Dondero’s intentions with regard to of the Trust. These concerns and the Board’s additional reasons for recommending that shareholders reject the take-over bid are further described in the Trust’s previous press releases recommending that shareholders reject the take-over bid, which are available at www.udfiv.com.
The board also reviewed recent developments in the litigation between NexPoint / Dondero and the Trust, including the 48e Judgment of the judicial district court in favor of the Trust granting the Trust’s motion to dismiss the libel suit brought by NexPoint Advisors, LP against the Trust, and the pending action relating to the books and records that NexPoint has brought against the Trust in Maryland in June 2021. In the opinion of the Board, these two lawsuits are further evidence of James Dondero’s willingness to waste NexPoint assets and resources and focus on vexatious litigation.
The Council also reviewed more recent developments in the Highland bankruptcy case in the US North District Bankruptcy Court (the “court”), which the court described as “very much like an unpleasant divorce.” including, among other things, the court order that Dondero be convicted of civil contempt for his violation of previous court orders as well as fines imposed on Dondero for his failure to comply with previous court orders.
On October 15, 2021, the litigation trustee of a Highland bankruptcy litigation trust filed a complaint alleging that Dondero “desperately mixed and exploited entities within his business for his personal gain” . Specifically, the complaint alleges that Dondero (1) caused Highland to pay tens of millions of dollars to or for the benefit of Dondero and its affiliates in order to evade creditors, (2) caused Highland to transfer assets to other Dondero entities for less than the reasonably equivalent value of the assets, (3) caused Highland to impose blood feuds on employees he considered disloyal, (4) used Highland as a vehicle to fraudulently induce a investment of approximately $ 75 million in another Dondero entity, (5) caused the fraudulent transfer of assets worth at least $ 100 million into two funds managed by Highland, (6) n ‘ disregarded Highland’s contractual and fiduciary obligations to investors and (7) embezzled Highland funds for use by other Dondero entities in exchange for artificially low interest, long-term notes that Dondero later claimed to extend (by 30 years) or retroactively forgive, all without any consideration for Highland. The complaint further alleges that Dondero’s companies “were operated and controlled for the benefit of Dondero, with Dondero using complex corporate structures and transactions to transfer money and assets between different Dondero entities in the manner that ‘he considered the most advantageous for his own results’.
The board further observed that none of these material events relating to the Highland bankruptcy proceedings were disclosed to Trust shareholders by NexPoint in the tender offer documents.
Highland Capital filed for bankruptcy in October 2019 and James Dondero ceded control of the bankrupt company in January 2020 as part of a deal with creditors. The case and the associated proceedings are Highland cap. Mgmt., LP v. Highland Cap. Management. Fund Advisors, SEC., Bankr. ND Tex., 19-34054, Highland Capital Management LP vs Highland Capital Management Fund Advisors, LP, NexPoint Advisors, LP, Highland Income Fund, NexPoint Strategic Opportunities Fund, et al, ND Tex., Adv. Proc. n ° 21-03000 and Highland cap. Management, LP v. Dondero, banker. ND Tex., Adv. Proc. n ° 20-3190, hearing 03/24/21.
About United Development Fund IV
United Development Funding IV is a Maryland real estate investment trust. UDF IV was incorporated primarily to generate current interest income by investing in secured loans and generating profits from investments in residential real estate. Additional information about UDF IV is available 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.
Caution Regarding Forward-Looking Statements
This press release contains forward-looking statements relating to United Development Funding IV and the tender offer which are based on management’s current expectations and estimates and do not constitute guarantees of future performance or future events. Such forward-looking statements can generally be identified by our use of forward-looking terminology such as “may”, “will”, “expect”, “intend”, “anticipate”, “estimate”, ” believe ”or other words. Readers should be aware that there are various factors, many of which are beyond the control of the Trust, that could cause actual results to differ materially from the forward-looking statements made in this correspondence. Therefore, readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this correspondence. The forward-looking statements contained in this document speak only as of the date on which such statements were made, and the Trust assumes no obligation to update any such statements which may become false as a result of subsequent events.