United Development Funding IV Enters Forbearance Agreement on $35 Million Loan
Meyer Wilson has been contacted by numerous investors with concerns about UDFs alleged concentrated lending practices.
Maryland-based United Development Funding IV (UDF IV), a real estate investment trust, announced on May 23 through a filing with the Securities and Exchange Commission (SEC) that it has entered into a Forbearance Agreement with lenders Waterfall Eden Master Fund, Ltd., Waterfall Sandstone Fund, LP and HEDCO ABS, Ltd., effective as of March 4, 2016.
UDF IV initially entered into a $35 million loan agreement with the lenders on July 2, 2014. Under the terms of the Forbearance Agreement, the lenders will refrain from exercising their default-related rights against UDF IV until August 4, 2016. According to the SEC filing, this agreement “will earlier terminate if the loan is repaid, if an event of default occurs, or if [UDF IV] fails to meet or maintain certain representations, warranties, terms, conditions or covenants contained in the Forbearance Agreement.”
In exchange for the forbearance, it is stated that UDF IV paid all accrued interest, as well as a portion of the principal on the loan. Interest on the loan will accrue at the default interest rate of one month LIBOR plus 11.5%, but during the Forbearance Agreement UDF IV will only be required to pay interest at the non-default rate of one month LIBOR plus 9%. The difference will be added to the outstanding balance of the loan and will be due on January 5, 2017.
UDF IV will also provide certain financial reporting to the lenders and will suspend distributions to its shareholders during the time of the Forbearance Agreement. It will not originate new mortgage loans, grant additional collateral to any other lender, substitute collateral to any other lender, or dispose of assets without written consent from the lenders. UDF IV is also required to use a portion of its future cash flow to pay interest due under the loan, principal, and transaction expenses.
As of May 23, the balance of the loan is approximately $28.5 million.
If you have lost money investing in United Development Funding IV, contact Meyer Wilson today to request a free consultation to discuss your claim. We work on a contingency fee basis, so there are no attorney fees unless we recover money on your behalf.