NexPoint Provides Update on United Development Funding IV (UDFI) Following Indictment of UDFI Officers

Rhea-AI Summary

NexPoint Strategic Opportunities Fund (NYSE:NHF) has provided an update on United Development Funding IV (UDFI) following an October 15, 2021 indictment of four UDFI executives for securities fraud. This indictment adds to UDFI's ongoing legal troubles, including prior SEC actions and shareholder lawsuits. Despite these issues, the UDFI Board has not engaged with NHF, the largest shareholder, regarding transparency concerns. NHF is actively seeking to purchase UDFI shares at $1.10 each, providing a liquidity option for investors. The situation raises significant accountability and transparency issues for UDFI.

Positive

• NHF is offering to purchase UDFI shares at $1.10, providing liquidity for investors.

Negative

• Four UDFI executives face indictment for securities fraud, raising concerns about corporate governance.
• UDFI has not provided financial information to shareholders since November 2015 and has not held an annual meeting since 2014.
• The company's management has been accused of withholding information and prioritizing management fees over shareholder value.

DALLAS, Oct. 22, 2021 (GLOBE NEWSWIRE) -- NexPoint Strategic Opportunities Fund (NYSE:NHF) (“NHF” or “NexPoint”) today provided an update on United Development Funding IV (“UDFI” or the “Company”) following an indictment filed in federal court on October 15, 2021 that charges four executive officers of the Company with securities fraud and conspiracy to commit wire fraud affecting a financial institution.

According to the indictment, Hollis Greenlaw, Chairman of the UDFI Board of Trustees (the “Board”) and Chief Executive Officer, Ben Wissink, President, Cara Obert, Chief Financial Officer, and Brandon Jester, Director of Asset Management, engaged in a scheme to defraud investors using multiple investment fund entities, including UDFI. The officers named all hold similar positions at the other entities involved in the alleged scheme. A copy of the indictment can be found here .

The indictment is the latest in a long list of charges and complaints surrounding UDFI, including a 2018 SEC enforcement action against the Company and its executives, multiple private securities fraud actions, and shareholder derivative cases. Despite substantive evidence of corporate wrongdoing and management’s blatant disregard of a permanent injunction that resulted in the Company’s shares being deregistered in 2020, the Board continues to permit management to withhold information from investors, collect millions of dollars in management fees, and spend material amounts of corporate funds on litigation that shows no evidence of enhancing shareholder value.

The indictment reinforces investor concerns about the lack of transparency and accountability at UDFI. As the largest shareholder of UDFI, NexPoint has previously raised issues about the management and oversight of UDFI and sought to engage the UDFI Board in a dialogue that could result in steps to return the Company to a path toward value creation. The Board to this date has refused to talk to NexPoint, prompted by management’s false accusations regarding NexPoint’s intentions and past conduct. 

The Company has failed to provide any substantive financial information to shareholders since November 2015, nor has it held an annual meeting since 2014, completely denying its shareholders any view of the current state of the Company’s affairs or insight into the future prospects of their investment. After various requests for transparency were ignored, NexPoint submitted a books and records demand (the "Demand") to the UDFI Board in August 2020, seeking access to basic information that shareholders are entitled to receive in order to determine the financial condition and results of operations of UDFI and the value of its shares (which could no longer trade publicly due to the SEC deregistration). The Company has not yet complied with the Demand and continues to resist NexPoint’s efforts, forcing NexPoint to seek relief through the courts. NexPoint is nevertheless committed to promoting long-term value at UDFI, and thus plans to continue to its efforts to obtain basic financial information and increase accountability.

In the meantime, NHF has an active offer outstanding to purchase any and all Shares of Beneficial Interest (the “Shares”) of UDFI at a price of $1.10 per Share upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Assignment Form for the offer (which together constitute the “Offer” and the “Tender Offer Documents”). The Offer from NHF provides shareholders with an immediate liquidity option. The Tender Offer Documents are available at www.UDFITenderOffer.com, or from the information agent for the Offer, as discussed below.

As previously announced on December 14, 2020, the Offer is conditioned upon, among other things, the satisfaction or waiver of the following conditions: (i) there shall not have been threatened, instituted, or pending any action or proceeding before any court or any governmental or administrative agency (a) challenging the acquisition of shares pursuant to the Offer or otherwise relating in any manner to the Offer, or (b) in the sole judgment of NHF, otherwise materially adversely affecting the Company; (ii) NHF shall have received all required governmental approvals, if any, for the Offer; (iii) NHF shall have had the opportunity to conduct sufficient due diligence to determine whether the offered price per share is reasonable given the current financial condition and results of operations of UDFI; (iv) the Board of Trustees of UDFI shall have waived in writing the ownership limitations set forth in Article VII of the Declaration of Trust of UDFI as such limitations would otherwise apply to the Offer; and (v) NHF shall have received satisfactory evidence that UDFI has continued to qualify as a real estate investment trust (“REIT”) under federal tax laws and thereby to avoid any entity-level federal income or excise tax.

On January 8, 2021, UDFI announced that it had reduced the percentage of outstanding Shares that a shareholder may own from 9.8% to 5.0%. The Company took such action in an effort to frustrate the Offer. It also announced it amended the Company’s bylaws to require that certain legal actions could be brought on behalf of or against UDFI only in certain courts in Maryland. NexPoint and its advisors are reviewing these actions and their legality under applicable law.

Shareholders should read the Offer to Purchase and the related materials carefully because they contain important information. Shareholders may obtain a free copy of the Offer to Purchase and the Assignment Form from D.F. King & Co., Inc., the information agent for the Offer (the “Information Agent”), by calling toll-free at (800) 331-7543.

This release has been updated to include a link to the indictment filed October 15, 2021.

About the NexPoint Strategic Opportunities Fund (NHF)

The NexPoint Strategic Opportunities Fund (NYSE:NHF) is a closed-end investment company managed by NexPoint Advisors, L.P. that is in the process of converting to a diversified REIT. On August 28, 2020, shareholders approved the conversion proposal and amended NHF’s fundamental investment policies and restrictions to permit NHF to pursue its new business. NHF has repositioned its investment portfolio sufficient to achieve REIT tax status and is operating during its 2021 taxable year so that it may qualify for taxation as a REIT. NHF has also repositioned its portfolio such that it believes it is no longer an “investment company” under the 1940 Act and has filed an application with the SEC for a Deregistration Order. While awaiting the Deregistration Order, NHF will continue to be structured as a registered closed-end investment company.

For more information visit www.nexpoint.com/nexpoint-strategic-opportunities-fund

About NexPoint Advisors, L.P.

NexPoint Advisors, L.P. is an SEC-registered adviser to a suite of funds and investment vehicles, including a closed-end fund, interval fund, business development company, and various real estate vehicles. For more information visit www.nexpoint.com

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Risks and Disclosures

This document is for informational purposes only and is neither an offer to purchase nor a solicitation of an offer to sell any common stock of UDFI or any other securities. The offer to purchase common stock of UDFI will only be made pursuant to the Offer to Purchase, the Assignment Form and related documents. THE TENDER OFFER MATERIALS (INCLUDING THE OFFER TO PURCHASE, THE ASSIGNMENT FORM AND CERTAIN OTHER TENDER OFFER DOCUMENTS) WILL CONTAIN IMPORTANT INFORMATION. STOCKHOLDERS OF UDFI ARE URGED TO READ THESE DOCUMENTS CAREFULLY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION THAT SUCH STOCKHOLDERS SHOULD CONSIDER BEFORE MAKING ANY DECISION REGARDING TENDERING THEIR SHARES. Investors and security holders may obtain a free copy of these statements (when available) by directing such requests to the Information Agent, by calling toll-free at (800) 331-7543.

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Media Contact

Lucy Bannon
(214) 550-4572

lbannon@skyviewgroup.com

FAQ

What is the recent indictment related to NHF?

Four UDFI executives, including the CEO and CFO, were indicted for securities fraud and conspiracy to commit wire fraud on October 15, 2021.

How is NHF addressing the issues with UDFI?

NHF is actively seeking to purchase shares of UDFI at $1.10 each and has attempted to engage with UDFI's Board for greater transparency.

What are the transparency issues raised by NHF regarding UDFI?

UDFI has not provided substantive financial updates since November 2015 and has been accused of withholding crucial information from shareholders.

What is the significance of the indictment for NHF investors?

The indictment highlights serious governance issues at UDFI, which could adversely impact the financial stability and shareholder value for NHF investors.

How has the UDFI Board responded to NHF's concerns?

The UDFI Board has refused to engage with NHF regarding their transparency requests and governance concerns.