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Highland Opportunity Fund faces rising leverage risks amid buybacks and rate hikes, risking large losses for common shareholders.

07 Nov 2026, 08:43 WIB
Seeking Alpha
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Bearish
Highland Opportunity Fund faces rising leverage risks amid buybacks and rate hikes, risking large losses for common shareholders.

Highland Opportunity and Income Fund (HFRO) is nearing its leverage limit of 200% coverage due to ongoing common share buybacks and rising interest rates affecting its holdings. This situation increases the risk of forced asset sales or equity rights offerings, which could cause significant losses for common shareholders. Activist investor Saba has stopped buying shares, and the fund's common shares are expected to widen their discount to net asset value back to around 60%. Given these risks, HFRO common shares are currently not recommended for purchase despite their 43.19% discount to NAV.

Highland Opportunity and Income Fund (HFRO) is facing leverage and forced selling risks. For readers following US stocks on Pluang, here is the market snapshot as of Nov 07, 2026 14:01 WIB: out of 150 priced stocks, 76 rose and 74 fell. Notable movers include SPCE at USD 2.77 with a +16.39% change and 100% buy order activity, ABNB at USD 189.99 with a +11.67% change and 73% sell order activity, and FCEL at USD 9.96 with an +11.48% change and 74% sell order activity.

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