Watch the HFRO Q2 2023 Update Presentation
Hear from NexPoint’s Scott Johnson, Managing Director and Portfolio Manager, and Kevin Fullmer, Director of Product Strategy, as they discuss portfolio updates and recent performance.
Hear from NexPoint’s Scott Johnson, Managing Director and Portfolio Manager, and Kevin Fullmer, Director of Product Strategy, as they discuss portfolio updates and recent performance.
Fund NAV (As of Sep 28, 2023) | |
---|---|
Symbol | HFRO |
Inception | 01/13/00 |
NAV | $13.54 |
The Highland Income Fund (NYSE:HFRO) (“HFRO”), a closed-end investment company managed by Highland Capital Management Fund Advisors, L.P. (the “Adviser”), announced an update in the case against Credit Suisse, AG, Cayman Islands Branch, and Credit Suisse Securities (USA), LLC (“Credit Suisse”).
On February 14, 2023, the Dallas Court of Appeals issued a ruling reducing the judgment to an amount that, including offsets for prior settlement proceeds received by the funds, may result in the two funds recovering zero net dollars on the outstanding judgment. The plaintiff will appeal this to the Texas Supreme Court for interpretation of its prior order.
We do not believe the recent acquisition of Credit Suisse Group AG by UBS Group AG will impact the case against Credit Suisse at this time.
Background on the Case
The case was originally filed in 2013. Following a bench trial and jury trial, the Court issued its original judgment in favor of Claymore in 2015, which was confirmed by an appellate court in 2018. An appeal of that ruling sent the case to the Texas Supreme Court, which heard the case on January 8, 2020.
On April 24, 2020, the Texas Supreme Court issued an order that affirmed in part and reversed in part the 2018 ruling from the court of appeals. In the April 2020 order, the court upheld the $40 million fraud verdict that resulted from the jury trial; however, it did not uphold the contract damages and equitable relief awarded to Claymore by the trial court following the bench trial.
In its opinion, the Texas Supreme Court noted procedural issues related to the calculation of damages among the reasons for reversing part of the appellate court ruling. It remanded the case to the trial court to determine the appropriate damages calculations and enter a new damages award.
On June 28, 2021, the 134th Judicial District Court (the “Court”) issued a judgment against Credit Suisse, awarding $121 million to Claymore Holdings LLC (“Claymore”), the entity formed to pursue the collective claims on behalf of HFRO and NexPoint Diversified Real Estate Trust (NYSE:NXDT) (together the “Funds”). As legal proceedings are ongoing and all recoveries remain contingent, no award amount has been recorded in the Funds’ net asset values at this time.
The case is Claymore Holdings LLC v. Credit Suisse AG, Cayman Islands Branch et al., case number 05-21-00649-CV, in the Court of Appeals for the Fifth District of Texas at Dallas.
October 26, 2021 – Highland Income Fund (NYSE:HFRO) (“HFRO” or the “Fund”) issued the following update on its investment in Creek Pine Holdings, LLC (“Creek Pine”). The Fund invested in Creek Pine through TexMark Timber Treasury, L.P. (“Triple T”), a joint venture with CatchMark Timber Trust (NYSE:CTT) (“CTT”) and a group of institutional investors. Affiliated funds managed by NexPoint Advisors, L.P. (the “NexPoint Funds”) were also included in the investment. HFRO initially invested $180 million, representing the majority of the $200 million invested across the platform between HFRO and the NexPoint Funds. As of September 30, 2021, the platform’s total investment was valued at $293 million, with HFRO’s portion valued at $264 million.
On October 15, 2021, CTT announced that it had reached an agreement with its Triple T joint venture partners, including HFRO, for CTT to redeem its common equity interest in Triple T. This follows the previously announced sale of 300,000 acres of timberlands by Triple T for $497 million in cash. The sale was announced by CTT on September 1, 2021. The announcement indicated that the proceeds from the sale were primarily to be used to reduce leverage and pay down part of the preferred partnership interests. The 300,000 acres sold represents a portion of the 1.1 million acres of East Texas timberlands owned by Triple T.
As part of these transactions, HFRO and the NexPoint Funds redeemed $180 million, plus an early call premium. HFRO received its pro-rata share in the amount of $167 million. The Fund received the cash on October 15, 2021.
The balance of HFRO’s original investment after this redemption was converted into common equity in a new venture formed with a small group of institutional investors. The new entity now owns the remaining portion of the Triple T assets following the sale of 300,000 acres announced in September.
The parties involved in the new venture alongside the Fund are sophisticated institutional investors that manage private investment vehicles. Together they have significant experience owning and managing timber assets. With this expertise, the new venture intends to increase efficiencies and drive revenue for the property under a more favorable capital structure. A formal announcement introducing the new venture is expected in 2022.
August 19, 2021 – The Highland Income Fund (HFRO) holds various CLO equity positions in its portfolio. There was a recent monetization event in underlying securities of certain CLO equity holdings that contributed to performance. This resulted in a NAV increase of approximately $23.9 million, which was reflected in the NAV reported on August 19, 2021.
DALLAS, Sept. 5, 2023 /PRNewswire/ — The Highland Opportunities and Income Fund (NYSE: HFRO) (“HFRO” or the “Fund”) today announced its regular monthly distribution on its common stock of $0.0770 per share. The distribution will be…
DALLAS, Aug. 29, 2023 /PRNewswire/ — The Highland Opportunities and Income Fund (NYSE:HFRO) (“HFRO” or the “Fund”) announced today that the Fund is scheduled to host a conference call on Tuesday, September 12,…
DALLAS, Aug. 1, 2023 /PRNewswire/ — The Highland Opportunities and Income Fund (NYSE: HFRO) (“HFRO” or the “Fund”) today announced its regular monthly distribution on its common stock of $0.0770 per share. The distribution will…
DALLAS, July 5, 2023 /PRNewswire/ — The Highland Opportunities and Income Fund (NYSE: HFRO) (“HFRO” or the “Fund”) today announced its regular monthly distribution on its common stock of $0.0770 per share. The distribution will…
DALLAS, June 30, 2023 /PRNewswire/ — The Highland Opportunities and Income Fund (NYSE:HFRO) (“HFRO” or the “Fund”) announced today that the Fund is scheduled to host a conference call on Thursday, July 13,…