Highland Capital committee says trustee not needed after settlement

By Caroline Salls

Pittsburgh, Jan. 16 – Highland Capital Management, LP’s official committee of unsecured creditors objected to the U.S. Trustee’s motion for appointment of a Chapter 11 trustee to oversee Highland’s bankruptcy cases, according to a Wednesday filing with the U.S. Bankruptcy Court for the Northern District of Texas.

The committee said the trustee appointment motion should be denied for the same reasons that the court overruled the U.S. Trustee’s objection to the settlement between Highland and the committee that was approved on Jan. 9.

“The settlement completely overhauls the debtor’s governance structure that was in place at the time the trustee motion was filed,” the objection said.

Specifically, the committee said as a result of the settlement, James Dondero is no longer in a position of decision-making authority at Highland, and a new, independent board of directors has assumed control.

In addition, the committee said the settlement gives it significant information and oversight rights related to transactions and proposed transactions involving the company, and the creditor group also has standing to investigate and pursue claims against Dondero and some other insiders.

“In view of these and other significant changes resulting from the settlement, the U.S. Trustee’s arguments for a Chapter 11 trustee based upon past actions taken by prior management are largely irrelevant,” the committee said in its objection.

“More importantly, those historic actions under the prior regime cannot be used to support the request for appointment of a Chapter 11 trustee.”

The creditor group also said the U.S. Trustee fails to show how a court-appointed Chapter 11 trustee would be better positioned than the independent board to address Highland’s challenges.

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 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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