Highland Capital Management LP filed for Chapter 11 bankruptcy protection at the United States Bankruptcy Court for the District of Delaware.
The filing stems from a potential judgment being sought against the company, according to a news release. Although Highland Capital Management disputes the underlying claims, entry of the judgment in its maximum potential amount could result in a judgment against the company greater than the entity's liquid assets. The Chapter 11 filing was therefore necessary given its present liquidity position.
The potential judgment relates to a fund previously managed by the company. Investors of the Highland Crusader Fund sued Highland Capital Management in 2016, alleging it repeatedly delayed liquidating the remaining assets of the fund, which the company closed in 2008.
On the company's bankruptcy filing, the Redeemer Committee of the Highland Crusader Fund is listed as an unsecured creditor with a $189.3 million disputed claim.
The other entities on the Highland Capital Management investment platform, as well as all their advised funds, are not filing any bankruptcy petitions. All charitable giving vehicles and entities supporting community foundations are unaffected by the filing, according to the news release. Highland Capital Management added that it does not expect the filing to negatively impact any of its advised accounts.
In a separate news release, NexPoint Residential Trust Inc. noted that Highland Capital Management directly holds an immaterial amount of NexPoint Residential Trust, totaling about 3.95% of market cap or fewer than 1 million shares. The other NexPoint Residential Trust shares that are reported as owned by officers, directors and other affiliates are not subject to the bankruptcy filing.
The real estate investment trust does not expect any shares held by Highland Capital Management to be sold for months to come, if at all, as a result of the filing.