FrontFour Capital Urges Medley Capital Holders to Reject Merger With Sierra Income

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FrontFour Capital Group LLC on Thursday urged shareholders of Medley Capital Corporation ( MCC ) to oppose the planned combination with Sierra Income Corp. and Medley Management Inc ( MDLY ).

In an open letter to shareholders, FrontFour, which owns about 3.7% in Medley, expressed its "serious concerns" about the proposed deal announced Aug. 8.

"In our view, the transaction fails to maximize value for MCC shareholders and is a brazen attempt by MCC's external manager and the controlling shareholders of MDLY to transfer material value in MCC to MDLY owners, including Brook and Seth Taube," said FrontFour in the letter.

With MCC shares currently trading at around $3.30 per share, the proposed transaction provides no apparent path to bridge the massive ~44% discount to MCC's current NAV of $5.90 per share, the investment fund said.

"We believe MCC's equity could be worth 0.8x to 1.0x NAV or $4.72 to $5.90 per share in an outright sale or windup, representing a potential return of 40% -- 70%. In a conservative scenario where we assume that all 4 and 5 rated credit assets are written off, we arrive at a NAV of $4.97 per share or 0.84x."

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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This article appears in: Investing , ETFs
Referenced Symbols: MCC , MDLY

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