NexPoint Submits Competing Proposal for UDF IV with Improved Shareholder Economics, Awaits Engagement from UDF IV Board of Trustees

Rhea-AI Summary

NexPoint has submitted a competing proposal to UDF IV's Board of Trustees, challenging the planned merger with Ready Capital (RC). The proposal offers improved shareholder economics compared to the Ready Merger scheduled for March 4, 2025.

Key advantages of NexPoint's proposal include:

• Higher pre-closing dividend through enhanced balance sheet distributions
• 100% shareholder entitlement to CVR loan proceeds (vs. Ready's complex structure with shareholder benefits)
• Intent to recover improper indemnification payments with 100% of net recoveries going to shareholders

NexPoint, a major shareholder, will not vote at the March 4 Special Meeting and urges a one-month postponement for proper proposal evaluation. The company calls for shareholders to withhold voting until the UDF IV Board fully assesses their proposal.

Positive

• Higher pre-closing dividend distribution proposed
• 100% of CVR loan proceeds to shareholders vs. Ready's 60%
• Potential recovery of improper indemnification payments for shareholder benefit

Negative

• Current board showing lack of engagement with major shareholder
• Existing governance issues including fraud and disclosure violations
• Persistent illiquidity problems

Implores UDF IV Board to Postpone March 4 Special Meeting for One Month to Engage with NexPoint and Appropriately Evaluate Proposal

NexPoint Will Not Vote at Special Meeting Without Due Consideration of Proposal

DALLAS, Feb. 27, 2025 /PRNewswire/ -- NexPoint Advisors, L.P. (together with its affiliates "NexPoint") today announced NexPoint Real Estate Opportunities, LLC has submitted a competing proposal to the Board of Trustees of United Development Funding IV ("UDF IV" or "the Trust") ahead of the Special Meeting of UDF IV Shareholders (the "Meeting"), scheduled for March 4, 2025, to vote on the proposed merger of UDF IV with Ready Capital (NYSE: RC) (the "Ready Merger").

The confidential proposal submitted by NexPoint mirrors many elements of the Ready Merger but provides shareholders with superior economic terms, including enhanced balance sheet distributions, full entitlement to Contingent Value Rights ("CVR") loan proceeds, and potentially large indemnification reimbursements. Specifically, NexPoint's offer contemplates balance sheet distributions that it believes will provide shareholders with a higher pre-closing dividend than the Ready Merger. Shareholders would also receive 100% of the net principal and interest recovered on the CVR loans. By comparison, the Ready Merger entitles Ready Capital to 100% of the CVR loan proceeds until it has recovered $13.3 million net, and thereafter shareholders only receive credit for 60% of additional net recoveries, which UDF IV estimates to be as much as $20 million. Additionally, NexPoint proposes to cease further indemnification payments for the imprisoned management team and recipients of the improper indemnity payments associated with the SEC disgorgement and intends to recover those improperly advanced legal fees and indemnity payments, with 100% of net recoveries being distributed to shareholders.

In connection with the proposal, NexPoint provided the following comment:

"Given the indefensible lack of engagement by the UDF IV Board with one of its largest shareholders, NexPoint will not vote at the March 4 Special Meeting on the proposed Ready Capital transaction. We implore UDF IV to postpone the Meeting by one month to properly evaluate our superior proposal, which offers a better economic outcome for shareholders and would finally end the litany of governance failures at UDF IV, including fraud, disclosure violations, poor performance, and persistent illiquidity. We urge the UDF IV Board to give our proposal full consideration consistent with its fiduciary duty, and we hope to engage in meaningful discussions expeditiously."

NexPoint asks shareholders to take no voting action until the UDF IV Board has fully assessed NexPoint's proposal and engaged meaningfully in discussions with NexPoint and encourages the Board to postpone the upcoming Special Meeting regarding the proposed Ready Merger until it has had the opportunity to do so. Shareholders who have already cast their vote may withdraw their vote by reaching out to their broker. 

For More Information:

NexPoint encourages shareholders to visit udfaccountability.com for more information. Shareholders can complete the contact form on the site to receive ongoing updates about UDF IV, the Ready Merger, and any competing proposals.

About NexPoint

NexPoint Real Estate Opportunities, LLC is a wholly owned subsidiary of NexPoint Diversified Real Estate Trust, Inc. (NYSE: NXDT), a diversified real estate investment trust externally advised by an affiliate of NexPoint Advisors, L.P.

NexPoint Advisors, L.P. is an SEC-registered adviser on the NexPoint alternative investment platform. For more information visit www.nexpoint.com

IMPORTANT INFORMATION

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements regarding NexPoint's beliefs about the ultimate amount of any pre-closing dividend and other economic consequences of the proposed transaction for UDF IV's shareholders and other statements identified by words such as "expect," "intend," "believe," the negative version of these words and similar expressions that do not relate solely to historical matters. Forward-looking statements are based on NXDT's current expectations and assumptions regarding capital market conditions, NXDT's business, the economy and other future conditions. Forward-looking statements are subject to risks, uncertainties and assumptions and may be affected by known and unknown risks, trends, uncertainties and factors that are beyond NXDT's control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Important factors that could cause actual results to differ materially from those in the forward-looking statements include regional, national or global political, economic, business, competitive, market and regulatory conditions, and those described in greater detail in our filings with the Securities and Exchange Commission, particularly those described in NXDT's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the NXDT's Annual Report on Form 10-K and other filings with the SEC for a more complete discussion of risks and other factors that could affect any forward-looking statement. Any forward-looking statement made in this press release speaks only as of the date on which it is made. NXDT undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

CONTACT INFORMATION

For Additional Information/Updates on UDF IV
Website: www.udfaccountability.com 
Email: udfinvestors@nexpoint.com

Media Contacts
Lucy Bannon (NexPoint): lbannon@nexpoint.com
Paul Caminiti/Pamela Greene (Reevemark): nexpointteam@reevemark.com

NexPoint Investor Relations
Kristen Thomas: ir@nexpoint.com

View original content:https://www.prnewswire.com/news-releases/nexpoint-submits-competing-proposal-for-udf-iv-with-improved-shareholder-economics-awaits-engagement-from-udf-iv-board-of-trustees-302387957.html

SOURCE NexPoint Advisors, L.P.

FAQ

What are the key differences between NexPoint's proposal and the Ready Capital merger for UDF IV shareholders?

NexPoint offers higher pre-closing dividends, 100% of CVR loan proceeds (vs Ready's structure), and full shareholder distribution of recovered indemnification payments.

When is the UDF IV Special Meeting scheduled for the Ready Capital merger vote?

The Special Meeting is scheduled for March 4, 2025, though NexPoint is requesting a one-month postponement.

How much could shareholders potentially recover from CVR loans under the Ready Capital merger?

Under Ready Capital's merger, shareholders would receive 60% of recoveries after $13.3M, with potential additional recoveries estimated at $20M.

What action is NexPoint recommending to UDF IV shareholders regarding the March 2025 vote?

NexPoint recommends shareholders take no voting action until the UDF IV Board fully assesses their proposal and engages in meaningful discussions.