One of two nominees put forward by activist investor Ironsides Partners has won a seat on the board of Fifth Street Senior Floating Rate Corp (FSFR).
Richard Cohen was elected to the business development company’s (BDC) board on 7 April, according to a Securities and Exchange Commission filing.
Ironsides, which owns 6.4 percent of the $698 million BDC, had also nominated its founder, Robert Knapp. However, the second available seat went to Ivelin Dimitrov, chief investment officer at the external manager Fifth Street Asset Management (FSAM).
Ironsides has previously accused FSFR of acting in the interest of the external manager, to the detriment of shareholders. It said the company had been grossly underperforming while paying excessive incentive fees to FSAM.
“FSFR stock has produced a dismal negative 37 percent return since its IPO, including reinvestment of dividends,” Ironsides said last month.
Despite these capital losses suffered by shareholders, FSFR has paid $8.3 million in incentive fees to its external advisor.
Although Ironsides won only one seat on the board, Knapp said it was still a good sign. “It’s not a sweeping victory, but it’s still a victory,” Knapp told PDI. “It’s no longer a cozy little club. Someone who sees it as their job to advocate for the shareholders is now on the board.”
Dimitrov won 8.4 million votes for a seat on the seven-man committee, while Cohen took 8.6 million.
Cohen is chairman of Lowey Dannenberg Cohen & Hart, a law firm that represents investors and directors in public companies, including closed-ended funds. He has also been a director of Crossroads Capital, a BDC, since July 2015, and is a member of the valuation, audit and nominating committees.
Most of the other FSFR directors are affiliated with FSAM. BDCs normally have staggered board elections. Two more seats will be up for grabs next year and Ironsides plans to nominate more independent directors.
In previously filed proxy materials, Ironsides had also demanded that the investment advisor be replaced, though that move failed to get enough shareholder approval at last week’s meeting.
Fifth Street has continued to argue that that the investment advisor is the right manager for the BDC and that its fee structure is on par with competitors.
FSAM is also the investment advisor to the larger Fifth Street Finance Corp BDC that has $2.6 billion in assets. The BDC was the subject of similar shareholder activism from River North Capital Management last year, but River North was paid off by Fifth Street. The firm was offered a deal to trade in its FSC shares at a 30 percent premium in February.