At long last, an agreement has been reached between Highland Capital Management and RAIT Financial Trust. The former, helmed by portfolio manager James Dondero, released information about its holdings in the company to the Securities and Exchange Commission in November of 2016. In the time since, attempts have been made to adjust the membership of RAIT’s Board of Trustees. In May 2017, Highland Capital and RAIT reached a cooperation agreement whereby Highland Capital and its affiliates will vote shares in support of RAIT’s recommended slate of trustees at its annual meeting. Following the vote at that meeting, RAIT will appoint one of two candidates that have been recommended by Highland Capital.
Without question, the situation involving RAIT and Highland Capital is complex. It is a lot easier to make sense of things when you have a decent understanding of the key players. In particular, attention should be paid to James Dondero, the co-founder and president of Highland Capital. The innovative portfolio manager has more than 30 years of experience in the equity and credit markets. Throughout his career, he has demonstrated again and again his ability to effectively manage and strategize. The recent cooperation agreement between his firm and RAIT is just the latest example.The first thing to understand is that in November, Highland Capital reported its holdings with RAIT to the SEC. According to the filing, Highland Capital owned 5,282,377 shares, which is equivalent to 5.9 percent. James Dondero and Highland Capital understandably wanted more representation on the Board of Trustees, and that is when the back-and-forth began. In the end, two candidates who have been recommended by Highland Capital will join the board. One will join right after the matter is voted on, and the other will within 120 days of the agreement being reached.
How has James Dondero been able to navigate his firm through so many complicated situations? It is easier to understand when you are familiar with his history. A native of Hoboken, New Jersey, James Dondero attended the University of Virginia’s McIntire School of Commerce. He graduated from the school with high honors in 1984 with dual majors in accounting and finance. Directly out of college, he worked as an analyst on the Morgan Guaranty training program. In 1985, he began his role as a corporate bond analyst for American Express. He remained with American Express until 1989.In 1990, James Dondero and his partner Mark Okada became involved with a joint venture with Protective Life Insurance Corporation. This venture initially became Protective Asset Management Company, or PAMCO. It remained partly owned by Protective Life for a few years. In 1997, Okada and Dondero bought out the company’s stake. The following year, Highland Capital Management became official. The company became a successful, independently owned alternative investment management firm. In 2014, it had approximately $18.7 billion in assets under management. James Dondero lives in Texas because Highland Capital is headquartered in Dallas. The firm also has offices in New York City, Seoul, Sao Paolo and Singapore.
Highland Capital is now one of the largest and most experienced worldwide alternative credit managing firms in the world. It employs more than 180 people and specializes in complex debt deals, emerging trends and turnarounds. James Dondero and Highland Capital were instrumental in the early days of the collateral loan obligation, or CLO, market. Meanwhile, RAIT Financial Trust is a real estate investment trust, or REIT, that provides direct lending to owners of commercial real estate through a full-service lending platform. It makes sense that Highland Capital and James Dondero are interested in this particular REIT, and it will be interesting to see how the collaboration unfolds.The collaboration agreement between RAIT, Highland Capital Management and James Dondero is just the latest in a long line of successes not only for Highland Capital but for Dondero as well. While handling business for Highland Capital consumes much of Dondero’s time, he is also actively involved in many other funds and organizations. He is on the Boards of Directors of MGM Studios and American Banknote, and he serves as Chairman of the Board of Cornerstone Healthcare, NexBank and CCS Medical Corporation. With so much experience in this arena, he should have no trouble navigating things with RAIT. Learn More.