TICC Capital Corp will hold a special shareholders’ meeting on 22 December to vote on the proposed sale of the business development company’s (BDC) investment manager.
Shareholders will be asked to decide on whether to proceed with an agreement with Benefit Street Partners’ (BSP), one of three bidders for Connecticut-based TICC. The meeting will also see the appointment of six additional directors to the board, TICC said.
The vote, which had been scheduled for 27 October, was delayed by a court order following a lawsuit from NexPoint Advisors, an affiliate of Highland Capital Management which has been competing to acquire the investment manager and appoint its own director nominees.
A court ruled in October that NexPoint, which is a TICC shareholder, was not permitted to appoint its director nominees. NexPoint then failed in a subsequent appeal, TICC said.
NexPoint has since asked that the court stay its ruling and prevent the 22 December meeting from going ahead. TICC said it believed that this request, like NexPoint’s previous requests for relief, was baseless.
If the 22 December meeting is delayed BSP can walk away, without penalty, from the contract to acquire a controlling interest in TICC Management, TICC said.
Since announcing its plans to sell the investment management contract to BSP, TICC has been involved in a battle with NexPoint and TPG Specialty Lending (TSLX).
NexPoint and TSLX claim that TICC’s board did not give full consideration to their offers and prefers BSP’s bid because it includes a payment to outgoing management. Critics have argued that a payment to outgoing underperforming management is unwarranted.
BSP was forced to reveal in October that the payment was worth $10 million and a then unvalued 24.9 percent stake in the manager, which would be split between Jonathan Cohen, chief executive of TICC’s investment manager, Saul Rosenthal, its president and chief operating officer, and Chuck Royce, a director. Further disclosures in December showed that it would that the $10 million amount would be conditional on the investment advisor's ability to borrow money.
Two years after the close of the transaction, BSP would then be able to acquire the 24.9 percent stake for cash at the prevailing market value.
In 2014, management fees received by the present TICC investment advisor totalled $21 million. Critics of the BSP deal believe that the consideration to management used to be much higher.
TICC, which in a Q3 earnings report revealed that it had breached its 1:1 regulatory leverage limit, announced last month that it was selling $117 million of syndicated corporate loans at an average price of 98.9 percent in par value. The proceeds were to be used to repay outstanding borrowings in their credit facility, thereby reducing leverage.
A report from Wells Fargo senior analyst Jonathan Bock said that if TICC uses all of the $117 million from the sale to pay down debt, leverage would fall to 0.82x from 1.07x. “We believe that this sale is a positive step forward as they were able to reduce leverage without taking a major loss on the assets,” Bock wrote.
TICC said on 3 December that it repurchased 1.5 million shares at $6.72 per share. TICC had announced in November that it had authorised a $75 million stock buyback programme.