United Development Funding IV Experiences Events of Default; Suspends Distributions to Shareholders
United Development Funding IV (“UDF IV”), a Texas-based real estate investment trust announced in a May 23, 2016 filing with the Securities and Exchange Commission that it had experienced “certain events of default” and entered into a forbearance agreement with one of its lenders regarding a $35 million loan that originated on July 2, 2014.
UDF IV’s disclosure indicates that under the forbearance agreement UDF IV will suspend distribution payments to its shareholders. The filing also states that UDF IV will accrue interest at the one-month LIBOR rate plus 11.5%, but will only pay interest at the rate of one-month LIBOR plus 9.0%.
According to the SEC filing, United Development Funding IV has also agreed not to originate new mortgage loans, incur additional debt, grant addition or substitute collateral to any other lender, or dispose of assets without first obtaining the consent of its lenders.
The forbearance agreement also requires UDF IV to use a portion of its future available cash flow to pay transaction expenses, interest due under the loan, and loan principal. The loan is now due January 5, 2017, but if an event of default occurs, the forbearance period in the agreement will terminate, according to the filing.
UDF IV has been operating without an auditor since late in 2015, and has not filed an annual report for the year ended December 31, 2015. Trading in UDF IV stock was halted on a national stock exchange after the share price plunged in February of this year.
Securities Lawyers Continuing Investigation
The Peiffer Wolf Carr & Kane securities lawyers, Jason Kane and Joe Peiffer, have been investigating UDF IV for months and have spoken with a large number of UDF investors. They are preparing to take action on behalf of UDF investors, against some of the brokerage firms that recommended the UDF investments to investors without, the two attorneys believe, having a reasonable basis to do so.
The Peiffer Wolf Carr & Kane lawyers take most cases of this type on a contingency-fee basis and advance case costs, and only get paid for their fees and costs out of money they recover for their clients.
Investors who believe they lost money as a result of their investments in United Development Funding IV are encouraged to contact Jason Kane or James Booker for a free, no-obligation evaluation of their recovery options, at (585) 310-5140, by email at firstname.lastname@example.org, or through the contact form on this website.