Highland Capital Management emerges from Chapter 11 bankruptcy

By Sarah Lizee

Olympia, Wash., Aug. 12 – Highland Capital Management, LP’s Chapter 11 plan of reorganization went into effect on Wednesday, according to a notice filed with the U.S. Bankruptcy Court for the Northern District of Texas.

The plan was confirmed on Feb. 22.

The plan provides that a claimant trust will receive the majority of the debtor’s assets, including causes of action, as previously reported. The claimant trust will, for the benefit of the claimant trust beneficiaries, monetize the claimant trust assets, pursue the causes of action, and work to conclude the various lawsuits and litigation claims pending against the estate.

The reorganization will be accomplished by the cancelation of the debtor’s current equity interests. On the effective date, the debtor or reorganized debtor will issue new class A limited partnership interests to the claimant trust as limited partner and New GP LLC as general partner.

Under the plan, allowed priority non-tax claims will be paid in full, and allowed retained employee claims will be reinstated.

Allowed convenience claims will receive the lesser of 85% of their allowed claim and their pro rata share of the $13.15 million convenience claims cash pool. Holders of convenience claims can elect the treatment provided to general unsecured claims by making the GUC election on their ballots.

Allowed general unsecured claims and allowed subordinated claims will receive their pro rata share of claimant trust interests. The claimant trust interests distributed to allowed general unsecured claims will be senior to those distributed to allowed subordinated claims.

Holders of general unsecured claims that are liquidated as of the confirmation date can elect the treatment provided to convenience class election by reducing their claims to $1 million and making the convenience class election on their ballots.

Allowed class B/C limited partnership interests and allowed class A limited partnership interests will receive their pro rata share of the contingent claimant trust interests.

Highland also recently received court approval to enter into a $52 million exit facility with Blue Torch Capital LP as administrative agent and lender.

The facility consists of an up to $32 million senior secured term loan A and an up to $20 million senior secured term loan B.

The facility will mature in three years. Interest is Libor plus 700 basis points for the first two years, then Libor plus 800 bps in the third year. There will be a 1.5% Libor floor.

The facility includes a 1% upfront fee.

The proceeds will be used to repay subsidiary Trussway Industries’ term loan obligations in the approximate amount of $31.34 million, with the remainder of the credit facility to be used as working capital and to satisfy the obligations under the Chapter 11 plan, including the establishment of an administrative claims reserve and payment of allowed claims.

HCMLP is a Securities and Exchange Commission-registered investment adviser on Dallas-based Highland Capital Management’s global alternative investment platform. The company filed bankruptcy on Oct. 16, 2019 in the U.S. Bankruptcy Court for the District of Delaware. The case was later transferred to the Texas court under Chapter 11 case number 19-34054.

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