Company: NXDT
Filing Date: 2025-02-14
Form Type: 425
Source: 0001437749-25-004022
Chunk: 2

Company: NEXPOINT DIVERSIFIED REAL ESTATE TRUST
Filing Date: 2025-02-14
Form: 425
Chunk 2
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OR Option Sub LLC, a subsidiary of the REIT, in the aggregate amount of $4,750,000.

In December 2023, the TSXV reviewed all outstanding convertible loans of the REIT, and determined that the COVID Loans and the CDOR Loans were the only convertible loans that required amendments (the “Amendments”). If the Amendments to the COVID Loans are implemented, only the principal amount of each of the COVID Loans will be convertible into Class B Units for five-year terms ending between February 2, 2026 and June 8, 2026, with the term of the COVID Loans remaining as 20 years from their date of issuance. However, one COVID Loan in the amount of $400,000 with a conversion term that expired on September 9, 2024, will not be amended or affected by the Amendments. If the Amendments to the CDOR Loans are implemented, the conversion right under the CDOR Loans will be removed entirely. The three other convertible loans, with substantially similar terms to the COVID Loans, that the REIT currently has outstanding from entities controlled or managed by James Dondero, will not be affected by the Amendments.

Background to the Transaction

Further to the background provided in the Circular under the heading “Background to the Transaction”, the special committee of the REIT (the “Special Committee”) was established on September 15, 2024 to consider the viability of the potential merger transaction with NXDT. Although discussions of a possible transaction had commenced in April of 2024, the Special Committee was formed following receipt of the draft term sheet by NXDT on September 5, 2024 in respect to the Transaction and once it was determined by the Independent Trustees that there was a reasonable likelihood of the Transaction proceeding. All discussions with the board of trustees of the REIT regarding the Transaction prior to the formation of the Special Committee were conducted by the Independent Trustees.

For the reasons set out in the Circular under the heading “Reasons for the Recommendations of the Special Committee”, the Special Committee determined the Transaction was fair to Unitholders. The proposed price of US$0.36 per unit of the REIT (“Unit”) was initially set forth in the term sheet for the Transaction. The price was arrived at based on (1) the price per Unit paid under a previous acquisition by NXDT of 2,176,257 Units at a price of US$0.36 per Unit on April 19, 2024, and (2) an assessment of