Large Share Dump on Highland Income Fund Preferred – Updated News

A large block sell just took the Highland Income Fund 5.375% preferred down 40 cents to $24.89 or so–HFRO-A.

UPDATE

There is an old issue with a Highland Fund going back to 2011. I don’t believe this should have any affect on the Highland Income Fund–but I’m not a lawyer. I hold the preferred in multiple accounts

Here is a link to the article

Thanks to mcg and C Malcolm for pointing out news.

25 thoughts on “Large Share Dump on Highland Income Fund Preferred – Updated News”

  1. Update from DJ:
    Highland Capital Management Files for Bankruptcy–Update
    DOW JONES & COMPANY, INC. 9:55 AM ET 10/16/2019
    Highland Capital Management LP filed for bankruptcy Wednesday amid a legal battle with investors in a hedge fund that closed during the financial crisis.

    The fund manager entered chapter 11 protection in the U.S. Bankruptcy Court in Wilmington, Del., on Wednesday, listing as its largest creditor investors in the closed Highland Crusader Fund. Highland said it owed a disputed $189 million debt to a committee of Crusader Fund investors.

    Highland, which managed some $14 billion in assets as late as 2018, closed the flagship Crusader Fund in 2008. In 2016, investors sued the firm in Delaware Chancery Court, demanding Highland be fired as manager and accusing it of wrongfully delaying the fund’s liquidation while wrongfully paying itself millions of dollars.

    Highland co-founder James Dondero signed off on the bankruptcy petition. Mark Okada, who founded Highland with Mr. Dondero 26 years ago, announced his retirement from the firm last month.

    In a statement, Highland said the filing was made “in consideration of its liquidity profile” and stems from a potential judgment in favor of the Redeemer Committee.

    Highland said it disputes the investors’ claims but acknowledged that the maximum potential judgment could exceed its liquid assets. Between 2011 and 2016, Highland distributed $1.55 billion to Crusader Fund investors, completing 90% of the liquidation process, according to the statement.

    Write to Andrew Scurria at Andrew.Scurria@wsj.com

    (END) Dow Jones Newswires
    10-16-191055ET
    Copyright (c) 2019 Dow Jones & Company, Inc.

  2. I was burned alive with a Highland cef mid 2005-2006…and never got over their presentation VS market performance. And tried to warn others not to trust the charlatans.

    Nobody listened. Except for me. I refuse to go back to bad management

  3. thankfully I had sold my position a few weeks ago as it was not performing like other preferreds were and it was a low yielder.

    While the news is unrelated to the fund itself, it will impact overall sentiment

      1. Not always a bad idea. Looks like it is from a hold over issue from way back when (2011).

        1. Yes, I saw this later on. Let’s see where it settles in next week. I am open to reentry at a low price than my original cost basis.

      2. yeah i sold at 24.9 when i saw the news. i only had 300 shares but if i am not sure what’s going on i get out. i expect hfro-a will recover.

        1. Decided to sell and take a very small cap gain of $0.03/share. Like Libero, I prefer to get out before the real blood starts to flow.

          It was one of my weaker holdings, so no regrets at dumping it.

  4. Could be buying opportunity. This is not going to affect the fund. The rest of the business carries on.

    The BK is over a Highland hedge fund called “Crusader Fund” that was impacted by GFC and a recent arbitration hearing earlier this year. They didn’t have the cash for the arb ruling $$$ but this impacts an investment adviser unit within Highland Capital Management.

    1. The preferred is from Highland Income Fund—Highland Capital is a management company -related company –I haven’t found the news.

  5. The preferred followed a momentum in the common stock as someone took it 8% down right after the open. However I wasn’t able to find any news that could drive the common share below the December bottom

      1. Haven’t found the news–but shouldn’t have affect on the Highland Income Fund–directly.

    1. Here I thought HFRO-A was a hidden gem, with blessing with the venerable Moody Rating. No new rating. Moody was indeed very positive on the preferred, which I will not describe in detail. HFRO and HFRO-A seems to recover some from the lows. I have 800 shares of the HFRO-A, with half of them bought after the QDI dividends received. Looked at the ICMB reissuing CMFNL. ICMB dividend and price history seems to suggest that it is just like AHT (Ashford Hospitality) or Colony Capital (CLNY) [both of them with tons of preferreds). I sold off quite a few shares of CLNY preferreds. Today, CLNY-G is now up close to par (7.5% coupon). So, I am gun shy to sell HFRO-A and plow the proceeds to CMFNL. Richard Hill, SA late comer writer, whom I thought joined Brad Thomas, writes on many of Rida’s pumped up issues. After CLNY bought presumably some assets for dirt, the stock has been climbing nicely.
      Google search gives only this info below:
      “The Highland Income Fund is a closed-end fund managed by Highland Capital Management Fund Advisors, L.P. that seeks to provide a high level of current income, consistent with the preservation of capital in a registered fund format. The Fund declares and pays dividends of investment income monthly.Jul 29, 2019” At this time, 12:16 pm EDT. HFRO is down just close to 1% with 1.42% drop on the Preferred. I suppose there could be some fear of becoming an orphan. I will hold them all for now. I am not thrilled to sell and buy more WPG-H. These Mall preferreds follow the common to the tee AND the Commons can be as unpredictable as the god awful oil/gas MLP’s IMHO.

      1. I just placed a sale order for HFRO-A for 400 shares @ $24.93. Not sure whether it would be filled. Sold CIO-A taking some profit and placed an order for CMFNL @ $24.90. Too much uncertainty. CMFNL seems like unlikely to fold, with consistent huge dividends for the common BDC just like AHT and CLNY. Bought a small test eREIT from an IRA account on APTS. LOAN, a eREIT on new houses seem to hold. I thank someone at this great WEB on KRG, so far performing well with juicy proforma dividends despite slightly high debt to equity.

        1. Good. All got filled. Not worth the stress with my weak heart presumably. My former Texan mentor used to say “okay to be wrong, but not to be dead wrong.” LOL.

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