Highland Capital entity files bankruptcy, cites potential judgment

By Caroline Salls

Pittsburgh, Oct. 16 – Highland Capital Management investment adviser entity Highland Capital Management, LP (HCMLP) filed Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the District of Delaware in connection with a potential judgment being sought against that entity, according to a Highland Capital news release.

Although Highland disputes the underlying claims, entry of the judgment in its maximum potential amount could result in a judgment against HCMLP greater than the entity’s liquid assets.

The company said HCMLP is the only entity on its platform that has filed for Chapter 11 protection.

All charitable giving vehicles and entities supporting community foundations are unaffected by this filing. HCMLP does not expect the filing to negatively impact any of its advised accounts.

Investment and business activities on the Highland platform are operating without disruption amid HCMLP’s reorganization. Highland said it does not anticipate any employment or management changes at HCMLP or elsewhere across the platform.

Highland said the potential judgment relates to a crisis-era fund previously managed by HCMLP. The fund has been in liquidation since 2011. Rather than liquidating the fund at the height of the crisis for pennies on the dollar, HCMLP carried out a liquidation process over time intended to maximize recoveries for investors.

The liquidation plan, which was finalized and approved by investors and HCMLP in 2011, established a committee of fund investor representatives to coordinate the liquidation process.

Between 2011 and 2016, HCMLP distributed more than $1.55 billion of the original account balance of roughly $1.7 billion, the release said. At that point, with more than 90% of the liquidation process completed, Highland said the redeemer committee filed a complaint against HCMLP resulting from a contract dispute over the timing of management fees and other related claims.

According to court documents, HCMLP has $100 million to $500 million in both assets and debt.

The company’s largest unsecured creditors are the Redeemer Committee of the Highland Crusader Fund, based in Boston, with a $189.31 million litigation claim; Patrick Daugherty, in care of attorney Thomas A. Uebler of Wilmington, Del., with an $11.7 million litigation claim; CLO Holdco Ltd. of Raleigh, N.C., with an $11.51 million contractual obligation claim; McCool Smith PC of Dallas, with a $2.16 million professional services claim; Meta-e Discovery LLC of Stamford, Conn., with a $1.85 million professional services claim; and Foley Gardere of Dallas, with a $1.4 million professional services claim.

HCMLP is an SEC-registered investment adviser on Dallas-based Highland Capital Management’s global alternative investment platform. The Chapter 11 case number is 19-12239.

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