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TRLPC: NexPoint sues TICC, asks to avoid 'rigged Soviet-style election"

Fri 16th October, 2015 4:00pm
By Kristen Haunss 
    NEW YORK, Oct 16 (Reuters) - NexPoint Advisors, a unit of 
Highland Capital Management, asked business development company 
TICC Capital Corp to hold a fair election of directors in a 
lawsuit in US District Court in Connecticut last week, as 
competing firms battle for control. 
    NexPoint, which has been a TICC shareholder since August, is 
asking for six directors to become board members at an Oct 27 
special meeting of TICC stockholders as part of its bid to 
become the investment adviser. 
    NexPoint "seeks to require TICC and its Board of Directors 
to hold a fair election of directors at the upcoming special 
meeting, rather than the rigged Soviet-style election defendants 
have now made clear they intend to hold," NexPoint said in the 
    TICC, which typically invests between US$5m and US$50m in 
middle-market companies, and also purchases debt and equity 
tranches of Collateralized Loan Obligations (CLOs), has rejected 
NexPoint's lawsuit. 
    "We are aware of NexPoint's lawsuit and believe its claims 
to be without merit," a TICC spokesperson said. "We believe that 
NexPoint's nominations for election to our board at the October 
27 stockholder meeting are invalid." 
    The BDC sector is under pressure due to deteriorating credit 
quality of their loan portfolios leading several BDCs to cut 
their dividends due to performance. 
    TICC said in August that its investment adviser had agreed 
to be bought by Benefit Street Partners, a unit of Providence 
Equity Partners. Later in August, Highland's NexPoint took its 
offer public. In September, TPG Specialty Lending (TSLX), the 
direct lending platform of TPG's credit-investment arm, 
announced its proposal, according to news releases. 
    "Commencing litigation was necessary to protect the 
stockholder franchise," said Thomas Surgent, partner and deputy 
general counsel of NexPoint. "We believe company management is 
conducting a sham election process designed to mislead 
stockholders and prevent them from choosing the best directors 
for their company. We strongly believe this conduct materially 
harms stockholders and is illegal." 
    A spokesman for Benefit Street Partners declined to comment. 
    As part of its plan, NexPoint offered to take a perpetual 
1.25% management fee, which it said would save TICC US$26m over 
10 years, and would waive another US$20m of management fees, 
according to Surgent. 
    NexPoint also offered TICC's stockholders a loyalty program 
- it currently uses a similar program in its NexPoint Credit 
Strategies Fund - where NexPoint provides a match of 2% on each 
share for any shareholder that stays in for more than 12 months. 
    "It's a very novel program  it's something that we could 
implement immediately upon becoming manager," Surgent said. 
    On Oct 9 NexPoint said it was increasing its proposal to 
include support for a tender offer or share repurchase program 
of between US$50m and US$100m, according to a news release. 
    The closing of TICC's acquisition by Benefit Street Partners 
is contingent upon TICC's stockholders approving a new 
investment advisory agreement and electing four new independent 
directors, according to an Aug 4 release. As part of the 
acquisition, Benefit Street said that it would transition TICC's 
portfolio from syndicated loans and CLOs to focus on private 
debt investments. 
    TPG Specialty Lending made a counter bid and said Sept 16 it 
was proposing to buy TICC Capital in a stock-for-stock 
transaction. That proposal was rejected by a special committee 
of TICC's board of directors, according to a Sept 21 news 
    "TSLX is the only proposal delivering substantial upfront 
value directly to stockholders, the true owners of TICC," said 
Josh Easterly, TPG Specialty chairman and co-chief executive 
    "The other proposals would deliver no upfront premium and 
put stockholders' investment in the hands of external managers 
with clear track records of significant underperformance," he 
said. "Our offer is real, clearly delivers value and we believe 
in the best interest of TICC stockholders." 
 (Editing By Tessa Walsh and Jon Methven) 
 ((jonathan.methven@thomsonreuters.com; Reuters Messaging: 
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