NexPoint-Affiliated Fund Makes Request Under Section 220 of the Delaware General Corporation Law, Seeks to Investigate Abrupt Change to Bylaws and Concurrent Meeting Adjournment, Among Other Concerns
DALLAS, Feb. 28, 2019 /PRNewswire/ -- An investment vehicle affiliated with NexPoint Advisors, L.P. ("NexPoint") issued a demand today to Medley Capital Corporation ("MCC" or the "Company") to make its books and records available for inspection. The investment vehicle, Highland Select Equity Master Fund, L.P. ("Select Fund"), which is an owner of common stock of MCC, makes the request under Section 220 of Delaware General Corporation Law (the "DGCL"), as it seeks to investigate potential wrongdoing in the adjournment of the special meeting of stockholders, originally scheduled for February 8, 2019 (the "February 8 Meeting").
Select Fund raises concerns about the Company's board of directors (the "Board") and their actions leading to the February 8 Meeting adjournment. This includes, among other things, the decision to amend the bylaws of the Company (the "Bylaws") on February 6, 2019 (the "February 6 Amendment"), which Select Fund believes improperly enabled the adjournment, which may not have passed a stockholder vote.
The agenda for the February 8 Meeting included a shareholder vote on a merger with affiliate Sierra Income Corporation ("Sierra"), pursuant to which the Company would merge with and into Sierra, which would then continue as the surviving company following the transaction (the "MCC Merger"). Both Sierra and MCC are controlled, directly or indirectly, by Medley Management Inc. ("MDLY"), a publicly-traded asset management firm. The closing of the MCC Merger is contingent upon MDLY merging with and into a wholly owned subsidiary of Sierra (the "MDLY Merger").
The Company announced on February 5, 2019 that it intended to adjourn the February 8 Meeting (the "February 5 Announcement") "in light of the U.S. government shutdown" that occurred between December 22, 2018 and January 25, 2019 (the "Government Shutdown"). According to the Company, the Government Shutdown hindered the review and/or approval of documentation required to close the mergers, but notably, not to hold the February 8 Meeting. At the time of the February 5 Announcement, the Bylaws did not grant anyone other than stockholders the ability to adjourn a stockholders' meeting, meaning that, the vote of a majority of stockholders (even if less than a quorum) would have been required to adjourn the February 8 Meeting. Select Fund believes the February 6 Amendment changed this requirement without the consent of stockholders, giving "the Chairman of the meeting… the authority in his or her discretion to regulate the conduct of any such meeting, including, without limitation, convening the meeting and adjourning the meeting (whether or not a quorum is present)…"
Select Fund believes the decision to adjourn the February 8 Meeting—and more specifically, the Board's role in facilitating it through the February 6 Amendment—was carried out in the interest of MDLY and its stockholders to the detriment of stockholders of MCC.
Considering the requirements of the MCC Merger (including the express terms of the merger agreement related to the MCC Merger), the Government Shutdown is not a viable excuse for the February 8 Meeting adjournment. Instead, Select Fund believes the Company sought to delay the February 8 Meeting because of the likelihood of a vote against the MCC Merger were the meeting to proceed as scheduled. The Board, complicit in this delay, appears to be in violation of its fiduciary duties by promoting the interests of MDLY and preventing MCC stockholders from rejecting the MCC Merger.
With its inspection demands, Select Fund seeks to investigate these concerns, along with other potential issues related to the February 8 Meeting adjournment and the February 6 Amendment.
All purposes of Select Fund's demanded inspection are described in Select Fund's demand, which is attached hereto.
About NexPoint Advisors, L.P. and Highland Select Equity Master Fund, L.P.
NexPoint Advisors, L.P. and Highland Select Equity Master Fund, L.P. are affiliates of a multibillion-dollar global alternative investment manager founded in 1993 by Jim Dondero and Mark Okada. A pioneer in the leveraged loan market, the firm has evolved over 25 years, building on its credit expertise and value-based approach to expand into other asset classes. Today, NexPoint and its affiliates operate a diverse investment platform, serving both institutional and retail investors worldwide. In addition to high yield credit, the firm's investment capabilities include public equities, real estate, private equity and special situations, structured credit, and sector- and region-specific verticals built around specialized teams.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
NexPoint Advisors, L.P. ("NexPoint"), together with the other participants named below, have filed a preliminary proxy statement with the Securities and Exchange Commission (the "SEC") to be used to solicit stockholders in connection with the Special Meeting of Stockholders (the "Special Meeting") of Medley Capital Corporation (the "Company") expected to take place on March 8, 2019. Prior to the Special Meeting, NexPoint, together with the other participants named below, intend to file with the SEC, and furnish to stockholders of the Company, a definitive proxy statement.
NEXPOINT STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE PRELIMINARY PROXY STATEMENT, THE DEFINITIVE PROXY STATEMENT, ANY AMENDMENTS OR SUPPLEMENTS TO SUCH PROXY STATEMENT AND OTHER PROXY MATERIALS RELATED TO THE SOLICITATION WHEN BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SEC'S WEB SITE AT WWW.SEC.GOV. IN ADDITION, THE PARTICIPANTS IN THIS PROXY SOLICITATION WILL PROVIDE COPIES OF THE PROXY STATEMENT AND OTHER RELEVANT DOCUMENTS WITHOUT CHARGE, WHEN AVAILABLE, UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS.
In accordance with Rule 14a-12(a)(1)(i) under the Securities Exchange Act of 1934, as amended, the following persons are anticipated to be, or may be deemed to be, participants in any such proxy solicitation: NexPoint, NexPoint Advisors GP, LLC, the general partner of NexPoint ("NexPoint Advisors GP"), Highland Global Allocation Fund ("Global Fund"), Highland Capital Management Fund Advisors, L.P., the investment advisor to Global Fund ("Highland Fund Advisors"), Strand Advisors XVI, Inc., the general partner of Highland Fund Advisors ("Strand XVI"), Highland Select Equity Master Fund, L.P. ("Select Fund"), Highland Select Equity Fund GP, L.P., the general partner of Select Fund ("Select GP"), Highland Select Equity GP, LLC, the general partner of Select GP ("Select LLC"), Highland Capital Management, L.P., the sole member of Select LLC and the investment advisor to Select Fund ("Highland Capital"), Strand Advisors, Inc., the general partner of Highland Capital ("Strand") and James D. Dondero, the President of NexPoint Advisors GP and Strand and ultimate control person of Strand XVI, NexPoint Advisors GP and Strand (collectively, the "Participants"). The Participants have an interest in the matters to be acted on at the Special Meeting as they intend to nominate two independent directors at the Company's 2019 Annual Meeting of Stockholders if the merger transaction to be considered at the Special Meeting is not approved by stockholders and NexPoint has stated its willingness to step-in as the external investment manager of the Company if the merger transaction is not approved by stockholders. Certain of the Participants hold direct or indirect interests in securities of the Company as follows: Global Fund holds and beneficially owns 335,000 shares of common stock of the Company and Highland Fund Advisors, Strand XVI and Mr. Dondero indirectly beneficially own such shares of common stock of the Company due to their relationship with Global Fund; Select Fund holds and beneficially owns 100 shares of common stock of the Company and Select GP, Select LLC, Highland Capital, Strand and Mr. Dondero indirectly beneficially own such shares of common stock of the Company due to their relationship with Select Fund.
NexPoint is not asking stockholders for their proxy cards and cannot accept proxy cards if sent. Stockholders SHOULD NOT send NexPoint their proxy cards.
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