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.  Continue reading...