Medley Capital Corporation (NTSE: MCC), a publicly traded business development company, has amended its bylaws relating to the organization and conduct of stockholder meetings. The company also disclosed multiple lawsuits brought by investors that relate to the company’s proposed merger with its affiliates Sierra Income Corporation, a non-traded BDC, and Medley Management Inc. (NYSE: MDLY).
The amendment includes allowing the chairman of the board, or in their absence or at their direction, any officer of the company, can call stockholders meetings to order and act as chairman. The chairman can determine the order of business and has the authority in his or her discretion to regulate the conduct of the meeting, including convening and adjourning the meeting.
Medley Capital disclosed that two purported class action lawsuits were filed in the Supreme Court of the State of New York by stockholders Helene Lax and Richard Dicristino. The plaintiffs are seeking unspecified compensatory damages.
As previously reported, Sierra plans to acquire Medley Capital and Medley Management, with Sierra being the surviving company that would be structured as a publicly-traded BDC. Medley Capital and Sierra are both controlled by Medley Management.
The Medley Capital executives and directors named as defendants in each complaint include Brook Taube (chairman, CEO and president), Seth Taube (director), Jeffrey Tonkel (director), Arthur S. Ainsberg (director), Karin Hirtler-Garvey (director), John E. Mack (director), Mark Lerdal (director), Richard T. Allorto, Jr (chief financial officer and secretary). The complaints also named Medley Capital, Sierra, Medley Management, and Sierra Management Inc. as defendants.
The complaints allege that the individuals named as defendants breached their fiduciary duties in connection with the proposed Medley Capital merger, and that the other defendants aided and abetted the alleged breaches. The defendants believe the claims are without merit and intend to defend the lawsuits “vigorously,” they said.
Additionally, Medley Capital was named in two lawsuits filed in the Delaware Court of Chancery by FrontFour Capital Group, a significant shareholder and outspoken opponent of the proposed merger, and Stephen Altman.
FrontFour and Altman are seeking injunctive relief and an order that Medley Capital produce certain books and records pertaining to the proposed merger transactions. The complaints do not seek monetary damages.
In the FrontFour lawsuit, the court ordered Medley Capital to produce the materials before its shareholders vote at the now rescheduled special meeting of shareholders. Medley said that it had substantially completed the order on January 28th.
Medley Capital, Sierra, and Medley Management each rescheduled their respective special meetings of shareholders for March 8, 2019, as reported by The DI Wire.
The meetings were originally scheduled for February 8th, but were adjourned, according to the company, due to the government shutdown as “key branches of the U.S. government were unable to process, review and/or approve documentation required to close the mergers.”
NexPoint Advisors L.P. recently submitted a competing management proposal related to the merger, which Medley Capital and Sierra have declined to pursue. Independent proxy advisory firms Glass Lewis & Co. and Institutional Shareholder Services, as well as FrontFour Capital Group, recently recommended that shareholders vote against the proposed merger in light of NexPoint’s competing proposal. Proxy advisory firm Egan-Jones Ratings recommended that shareholders vote for the merger.
Medley Capital Corporation is a closed-end, externally managed BDC that trades on the New York Stock Exchange (NYSE: MCC) and the Tel Aviv Stock Exchange (TASE: MCC). The company lends to privately-held middle market companies, primarily through directly originated transactions. As of September 30, 2018, the company’s portfolio had a fair market value of approximately $655.4 million.
Sierra invests primarily in first lien senior secured debt, second lien secured debt and, to a lesser extent, subordinated debt of middle market companies in a broad range of industries with annual revenue between $50 million and $1 billion. The company’s offering launched in April 2012 and has raised nearly $1 billion in total equity capital, as of the third quarter 2018. Sierra oversees a $967.7 million investment portfolio.
Medley Management is an alternative asset management firm with $4.8 billion of assets under management in two business development companies, Medley Capital Corporation and Sierra Income Corporation, Sierra Total Return Fund (NASDAQ: SRNTX), and several private investment vehicles.