United Development Funding IV fka UDFI

[Enterprising Investor]

UDF IV operating under Forbearance Agreement (5/23/16)

As disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on July 9, 2014, United Development Funding IV, a Maryland real estate investment trust (the “Trust”), entered into a loan agreement (the “Loan Agreement”) on July 2, 2014 with Waterfall Finance 4, LLC, an unaffiliated entity, for a $35 million term loan (the “Loan”). On May 17, 2016, the Trust and Waterfall Eden Master Fund, Ltd., Waterfall Sandstone Fund, LP and HEDCO ABS, Ltd. (collectively, the “Lenders”), as successors-in-interest to Waterfall Finance 4, LLC under the Loan Agreement, entered into a Forbearance Agreement effective as of March 4, 2016 pursuant to which the Trust acknowledged the occurrence of certain events of default and the Lenders agreed to forbear from exercising any of their default-related rights against the Trust until August 4, 2016 (the “Forbearance Period”). The Forbearance Period will earlier terminate if the loan is repaid, if an event of default occurs, or if the Trust fails to meet or maintain certain representations, warranties, terms, conditions or covenants contained in the Forbearance Agreement. On March 7, 2016, the Trust made a required payment of all accrued but unpaid interest and a portion of the principal on the Loan. During the Forbearance Period, interest accrues at the default interest rate of one-month LIBOR plus 11.5%, but the Trust is only required to pay interest at the non-default interest rate of one-month LIBOR plus 9.0%. The difference between the default interest rate and the non-default interest rate is added to the outstanding principal balance of the Loan and will be due and payable to the Lenders on January 5, 2017. The Trust is required to use a portion of its future available cash flow to pay transaction expenses, interest due under the Loan, and principal. The Trust has agreed to provide certain financial reporting to the Lenders and it has agreed to suspend distributions to its shareholders during the Forbearance Period. The Trust also agreed not to originate new mortgage loans, incur additional debt, grant additional or substitute collateral to any other lender, or dispose of assets without first obtaining the consent of the Lenders. The balance of the Loan as of May 23, 2016 is approximately $28.5 million.

http://www.sec.gov/Archives/edgar/data/1440292/000114420416104271/v440750_8k.htm