Dallas firm says it lacks cash to pay the $175M investors want from closed hedge fund
Dallas-based Highland Capital Management says it doesn't have the cash on hand to make a payment of $175 million if that amount is eventually awarded by an arbitration panel to investors in its shuttered hedge fund.
An attorney for the investment firm made the statement in a March 22 affidavit in Delaware Chancery Court that was meant to be sealed from public view. It came in a case in which Highland was sued by investors in a hedge fund that was shut down during the financial crisis. Arbitrators haven't yet issued a final financial award in the case, and Highland doesn't explain how it came to the $175 million figure in its court papers.
Investors in Highland's Crusader Fund were supposed to get their money within three years of its closure in October 2008, following losses on high-yield, high-risk loans and other types of debt. In 2011, Highland said it would take another three years to return the cash. A group of investors sued in 2016, saying Highland engaged in "willful misconduct and gross negligence" by refusing to return their money and taking more than $30 million in fees it wasn't entitled to.
An arbitration panel on March 6 issued a "partial final award" in favor of the investors, according court documents. A judge on March 21 asked Highland for an affidavit explaining the firm's "ability to pay the award" as calculated at different points in time, according to a transcript of the hearing. The hearing, which didn't detail the nature or size of the award, was related to the investors' request for a so-called status-quo order that would prevent Highland from making major changes to its corporate structure and assets.
Read more: https://www.dallasnews.com/business/money/2019/04/16/dallas-firm-says-lacks-cash-pay-175m-investors-want-closed-hedge-fund
