Highland Capital Management disclosure statement draws objections

By Sarah Lizee

Olympia, Wash., Oct. 21 – Highland Capital Management, LP’s disclosure statement drew objections Tuesday from the official committee of unsecured creditors and creditor UBS Securities LLC in the U.S. Bankruptcy Court for the Northern District of Texas.

“It is a waste of valuable resources for the debtor to pursue solicitation, and ultimately confirmation, of a plan that is unsupported by both the committee in its role as a fiduciary of all unsecured creditors and the committee members in their individual capacities,” the committee said in its objection.

“Unfortunately, notwithstanding the committee’s repeated protests to a number of provisions in the plan, including those which make it patently unconfirmable, the debtor has decided to press forward and seek the bankruptcy court’s approval to solicit a plan that is lacking the committee’s support.”

The committee said the plan impermissibly provides for the release of claims held by the debtor, including claims against “officers, directors, employees and agents of the debtor and Strand” and “related persons” of Strand, without justification as required by section 1123(b)(3)(A) of the Bankruptcy Code.

“Furthermore, the release purports to include claims which the committee has been granted standing to prosecute. The plan’s injunction and exculpation provisions are impermissibly broad and in direct contravention of Fifth Circuit law,” the committee added.

“Such deficiencies cannot be cured by the vote of creditors, particularly since, as a practical matter, the debtor’s largest voting creditors, in amount, have confirmed that they will not vote in favor of the plan or any other plan containing such provisions.”

Meanwhile, UBS said in its objection that “proceeding with solicitation of a fatally flawed plan, which does not have the support of the members of the committee, would be futile and require the debtor to incur unnecessary administrative costs to the detriment of all the debtor’s stakeholders.”

UBS said the plan appears to contemplate the payment in cash of more than $25 million on or shortly after the effective date to satisfy in whole or in part a number of claims, including administrative claims.

“But, the disclosure statement and financial projections do not describe how the debtor intends to satisfy such claims in compliance with the plan,” UBS stated.

UBS added that the plan unfairly discriminates against some of the debtor’s general unsecured creditors.

“The plan places such creditors into five separate classes without any real explanation for doing so other than with respect to the class of subordinated claims,” UBS said.

“In addition to placing such creditors in separate classes, the debtor also seeks to treat them inequitably.”

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, 2019 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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