NexPoint Advisors Enhances Medley Proposal

April 3, 2019

NexPoint Advisors Enhances Medley Proposal

April 1, 2019 | Luke Schmidt | Blue Vault

On April 1, 2019, NexPoint Advisors, L.P. (“NexPoint”) announced it had proposed to Medley Capital Corporation (“MCC”) several enhancements related to its original proposal to become MCC’s external investment advisor.  The updated proposal consists of the following:

• An external investment advisory agreement between MCC and NexPoint which includes reductions in the annualized management fee and incentive fees, resulting in aggregate annual savings to the Company’s stockholders of approximately $5.7 million over the Company’s current fee arrangements.

• A $10 million payment from NexPoint to MCC upon execution of the investment advisory agreement which would represent the equivalent of a 5.7% increase of $0.18 on the per share market value of $3.22.

• The commitment to purchase at least $30 million of MCC shares, one-third of which will be made during the 60 days following the transaction, an additional one-third during the following 90 days, and the final one-third during the following 90 days.  These purchases would further align NexPoint with the interests of the stockholders while also providing liquidity.

According to NexPoint, this proposal provides nearly $68.5 million of consideration that directly benefits MCC’s stockholders, including $10 million of immediate cash, $30 million in share purchases, and over $28.5 million of aggregate fee and expense savings over the next five years.

Related: NexPoint Affiliate Demands Medley Capital Corporation Records Regarding Proposed Merger

NexPoint continues to urge the remaining members of the Special Committee of the MCC Board of Directors to consider their enhanced proposal.  NexPoint communicated its enhancements in a letter sent to the Special Committee, reiterating its willingness to negotiate on their proposal terms.

The Board’s prior refusals to engage with NexPoint were denounced by the Court of Chancery of the State of Delaware on March 11, 2019, where it issued an opinion that found the Board of MCC violated its fiduciary duties for its failure to negotiate with NexPoint, among other reasons.  NexPoint believes the Special Committee can still act in the best interest of stockholders and fulfill its fiduciary duties by considering the enhanced proposal.

On March 29, 2019, MCC, Sierra Income Corporation (“Sierra”), and Medley Management, Inc. (“MDLY”) each announced that their respective Special Meetings of Shareholders held earlier in the same day in connection with MCC’s proposed merger with Sierra and Sierra’s concurrent acquisition of MDLY were convened and adjourned without any business being conducted other than the adjournment. Each meeting was rescheduled for April 19, 2019.

Sources:  Press Releases, SEC, Blue Vault

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Gregory De Jong, CFP, Co-Founder of Paragon Advisors, LLC.
July 7, 2015

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