I hear what you say and UDF is certainly not a innocent bystander.
The trial over here will be about the actual actions of the Bass
side vs what they presented to the markets. their actions (knowledge
of which comes from discovery)shows that they believed there is
substantial value in the loan portfolio while they presented a
case for no value to the unitholders. it boils down to that.
Now, regarding what you say:
1. you talk about the remedy (compensation) which will be monetary
only for the fund and its management for damage to the business.
2. the other thing you say is who is to fault with the loss of
value of the shares / units.
Lets start with the loss of value for the unit holders:
The auditors were in trouble for a single loan being kept on the books
at full value instead of being impaired. the fund claims that if it
was not for the misrepresentations, there is a good likelihood of
being able to get full recovery for that loan as well.
The disclosures missing which caused the fund management to pay the
fine to the sec: my take is that the sec did not say that there was
no economic value in the fund - which is what Bass claimed. udf now
explains their business model differently than they did in the past
financial results (and prospectus). that is what they paid those
fines for doing.
Those two facts do not really help Bass. the point is that Bass made
very concrete claim While knowing the real story WITHOUT DISCLOSING
even its identity (while much of the value destruction was done).
People can argue about facts and what they mean. in order for that to
happen, the facts need to be known and Bass deliberately created
misinformation while gaining monetarily from that to the detriment
of the unitholders. its hard to know what would have happened in a
different scenario, but its pretty clear that with the steep interest
rates Bass was paying for borrowing units, even a 6 month wait would
have been very material to their short position. that gave them a
clear incentive to do the wrong thing. the fact they were talking
about gaining control of the underlying assets / loans at a fraction
of the cost to the fund.
Lets think of that for a minute: you have $400M debt and the plan is
to sell all the loans for, lets say, $250M. that leaves $150M for
CODI plus whatever other obligations the fund would be charged with
doing and can not complete. not only is the downside not limited to
zero, but its very much unknown. that would be a pretty good reason
for anyone who knows the law to run away. that is pretty damming if
you ask me.
Now, lets talk about the damage to the fund itself: that is pretty
obvious that the fund got evidence that their funding bodies were
affected by the misrepresentations that the Bass group created AND
DISTRIBUTED IN A TARGETED WAY to disrupt the fund's financing
sources. now you show the results and you have a pretty much clear
cut case.
Finally: there is a very large issue with five years of not obtaining
certified results with clear opinion. that can probably be explained
in many ways, but the question here is how is it relevant to
2015 when these allegations were made. does UDF not want to show just
how extensive was the damage to the fund due to forced liquidation?
very possible. is it legit? that is a matter of a different case
(the case Nexpoint is trying to make in order to compel UDF to show
certified results). keep in mind that (according to discovery)
Nexpoint was approached by Bass as part of the original scheme and
was opining on what they can do as part of the plan. they, either,
are not coming with clean hands to the table.
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