AMENDMENT NO. 2 to REVOLVING CREDIT AND SECURITY AGREEMENT

Exhibit 10.16

Execution Copy

AMENDMENT NO. 2

               THIS AMENDMENT NO. 2 TO REVOLVING CREDIT AND SECURITY AGREEMENT (this “ Amendment ”) is made as of April 14, 2009 by and among HIGHLAND DISTRESSED OPPORTUNITIES, INC. (the “ Borrower ”), LIBERTY STREET FUNDING LLC, as the Conduit Lender (the “ Lender ”), THE BANK OF NOVA SCOTIA, ACTING THROUGH ITS NEW YORK AGENCY, as Secondary Lender (the “ Secondary Lender ”), and THE BANK OF NOVA SCOTIA, ACTING THROUGH ITS NEW YORK AGENCY, as Agent (the “ Agent ”) under that certain Revolving Credit and Security Agreement dated as of June 27, 2008 by and among the Borrower, the Lender, the Secondary Lender and the Agent (as amended, restated, supplemented or otherwise modified from time to time, the “ Credit Agreement ”). Defined terms used herein and not otherwise defined herein shall have the meaning given to them in the Credit Agreement.

WITNESSETH

               WHEREAS, the Borrower, the Lender, the Secondary Lender and the Agent are parties to the Credit Agreement and have agreed to amend the Credit Agreement on the terms and conditions set forth herein.

               NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

               1.  Amendments to the Credit Agreement . Subject to the satisfaction of the condition precedent set forth in Section 2 below, the definition of “Total Commitment” set forth in Section 1.01 of the Credit Agreement is hereby amended to delete therefrom the figure “$60,000,000” and to insert therefor the following figure: “$10,000,000”.

               2.  Conditions of Effectiveness . The effectiveness of this Amendment is subject to the condition precedent that the Agent shall have received: