Highlights Superior Value of TSLX’s Proposal that Provides Immediate,
Substantial and Sustainable Value to TICC Stockholders
Underscores the Chance for Stockholders to Send a Clear Message that
it is Time for an End to TICC’s Failed Leadership
Urges TICC Stockholders to Vote Against All Proposals at Upcoming
Special Meeting of Stockholders on October 27, 2015
TPG Specialty Lending, Inc. (“TSLX”; NYSE:TSLX), a specialty finance
company focused on lending to middle-market companies, filed its
preliminary proxy with the U.S. Securities and Exchange Commission
(“SEC”) on September 18, 2015 and today sent a letter to all
stockholders of TICC Capital Corp. (“TICC”; Nasdaq: TICC).
The letter urges TICC stockholders to vote against the management
proposals regarding TICC’s proposed transaction to change its external
manager at the upcoming special meeting of stockholders on October 27,
2015. In the letter, TSLX demonstrated that stockholders have a clear
choice: send a message to the TICC board that stockholders want the
immediate, substantial and sustainable value offered by the TSLX
proposal and do not want to reward an external manager.
A copy of the letter follows:
Dear Fellow TICC Stockholders:
I write to you today on behalf of TPG Specialty Lending, Inc. (“TSLX”),
a publicly traded specialty finance company focused on lending to
middle-market companies. We are reaching out to you, our fellow
stockholders, because you will soon be asked to make an important
decision that will have tremendous impact on the value of your
investment in TICC Capital Corp (“TICC”). Specifically, this is a
powerful opportunity to tell the board of directors that you, the
stockholders, are fed up with their poor management and value
destructive actions and that change is necessary.
Recently, our organization presented TICC’s special committee with a
proposal to acquire TICC in a transaction that would have delivered to
you, TICC’s owners, shares of TSLX stock with a value of $7.50 for each
share of TICC stock you own. Our proposal represented a 20% premium
to TICC’s undisturbed stock price1 and offered
TICC stockholders the opportunity to participate in the future value
creation of our industry-leading platform. This proposal that
delivers immediate and long-term value to you, the stockholders, was
rejected by the TICC special committee without engaging in any
substantive dialogue with us.
Instead of presenting you with a transaction that will generate
substantial and immediate value for stockholders, TICC’s board has asked
you to approve a proposal to change its external manager that rewards
its external manager while providing NO immediate or certain value to
stockholders. According to industry analysts, the proposal by TICC’s
board to change TICC’s external manager from TICC Management, LLC to
Benefit Street Partners, LLC is estimated to generate $60 million in
payments to TICC Management2, LLC that
could have gone to TICC stockholders.
We note that if the external manager was no longer interested in
managing the assets, as the Benefit Street Partner transaction
indicates, the most stockholder friendly move would be to have sold the
portfolio and delivered the proceeds to stockholders. That did not
happen. In our view, the value destroyed as part of the proposed Benefit
Street transaction is only further proof that the Board has once again
put stockholders as a lesser priority.
As a company that puts stockholder value first and as a fellow
stockholder in TICC, we strongly believe that the proposal to change
external managers to Benefit Street Partners is vastly inferior to our
proposal to combine TSLX and TICC. To defend
the value of your and our investments, we intend to solicit
proxies of TICC shareholders in opposition to the proposals to be
considered at the upcoming special meeting of stockholders on October
27, 2015. On September 18, 2015, we filed a preliminary proxy
statement and accompanying GOLD proxy card with the SEC, and we plan to
distribute each to stockholders once they have been cleared by the SEC.
In the meantime, do not sign or return a
WHITE proxy card that you receive from TICC or if you do, vote AGAINST
the management proposals.
Not only will a vote against the Benefit Street
Partners transaction stop this inferior proposal from moving forward,
but it will also send a clear message to the TICC special committee to
put stockholders first and engage with TSLX on our highly compelling
proposal.
As a stock-for-stock transaction, TICC stockholders would gain the
opportunity to participate in the future value creation of our
industry-leading platform led by a seasoned management team with a track
record of market-beating stockholder returns. We
believe this is a highly compelling opportunity for TICC stockholders as
you have seen a total stockholder return of -16% in 2014 while TSLX
stockholders have enjoyed a total stockholder return of 14.7%, which
represents 30% outperformance versus TICC.
1 Calculated based on the closing price of TICC shares on the
Nasdaq Stock Market on September 15, 2015, the day before TSLX publicly
announced its proposal.
2 Wells Fargo - September 18, 2015
After making our proposal public, we were excited to see and hear that
fellow investors, the market and third-parties echoed our excitement in
this transaction and immediately recognized the value of our proposal.
We urge stockholders to consider the below comments from leading equity
analysts and fellow TICC stockholders regarding our proposal:
-
“TSLX trumped BSP’s offer, in our view, by presenting TICC’s board
with a proposal that would provide a 20% premium to shareholders.” -
Cantor Fitzgerald, September 16, 2015
-
"I find TPG's offer the most compelling, given that it provides an
opportunity for TICC Capital investors to exit with an immediate
return.” - Mercer Capital Advisers Inc., September 16, 2015
-
“We believe that TSLX management has performed well for shareholders
and their offer represents an attractive premium to TICC shareholders
in the immediate future.” - PM at large investment manager in NYC
cited in Wells Fargo report, September 17, 2015
-
“TSLX has done the industry a favor by forcing this choice and
presenting a visible example of how shareholders can seek to unlock
value.” – Analyst/PM at a large NYC based investment manager, cited in
Wells Fargo report, September 17, 2015
-
“The TSLX offer presents shareholders a strong premium stock price.” –
Wells Fargo analyst, September 17, 2015
-
"Per TSLX's commentary their offer was designed to ‘enter into
constructive discussions’ with the Board…If ultimately the Board
pushes the BSP offer through, this is another black eye for the BDC
industry regarding shareholder returns vs. management compensation." -
Keefe, Bruyette & Woods, September 16, 2015
Because we are offering TSLX stock as part of our proposal, we recognize
it is vital for you to understand the strength and growth prospects of
our business. TSLX leverages the deep investment, sector, and operating
resources of TPG Special Situations Partners (“TSSP”), which with over
$12 billion of assets under management, is the dedicated special
situations and credit platform of TPG, a global private investment firm
with over $74 billion of assets under management. TSSP employs 133
professionals across four offices representing the full complement of
sourcing, underwriting and asset management across credit disciplines.
Not only has our business delivered outstanding returns for
stockholders, we feel we have achieved our success by abiding by our
core belief of putting stockholder value first. This is reflected in
our highly transparent governance, commitment to a stable, predictable
dividend policy, and our pioneering of stockholder buybacks in the
Business Development Company sector. Jeff Davis, Managing Director at
Mercer Capital Advisers, called TSLX “one of the best-managed companies
in the industry.”
A critical part of our focus on value is our approach to dividends. This
is a core aspect of the investment opportunity for our sector but also
an issue that is too often misunderstood or mismanaged. Our belief is
that business development companies should maintain consistent dividends
that are well covered by net investment income. Put simply, companies
should only pay dividends that they can afford.
TSLX has earned net investment income in excess of its dividend every
year since its inception. TICC’s net investment income, on the other
hand, has consistently fallen short of the dividend that has been paid
to its stockholders. This has caused TICC to incur excessive debt loads
to fund the dividend, resulting in consistent reductions in TICC’s net
asset value. In fact, at least two third-party analysts3
have indicated that they expect that TICC will have to cut its dividend
to survive because maintaining a dividend that exceeds net investment
income is simply unsustainable.
We think that a status quo TICC means an
unsustainable dividend. With TSLX, we believe that TICC
stockholders would gain confidence and visibility to a strong, durable
and growing dividend. We expect to continue our dividend policy
following any transaction and, to the extent we are successful in
rotating the TICC portfolio into higher yielding investments, this policy
would actually result in stockholders enjoying increased dividends.
As a fellow stockholder, you should know well that the unsustainable
status quo is a situation produced entirely by the mismanagement of the
current TICC Board of Directors. As we have shown and you have felt,
the results of this failed leadership have been incredibly destructive
to your investment and even the future viability of TICC as an
investment vehicle. As experts in this area, we cannot understand
why value-creating strategies such as stockholder buybacks or a shift in
investment strategy have not been used. After years of destroying value,
we were alarmed to see this board present a transaction that provides
value to an external manager that has close ties to existing board
members. Moves like this continue to put stockholders after the needs
of a select few. We urge you to vote AGAINST the Benefit Street
transaction and send a clear message that you are done with the
board’s failed strategy and leadership. The time for change is now.
In the coming weeks, you will hear many conflicting viewpoints from
TICC, Benefit Street and NexPoint Advisors, LP, another external manager
that has also proposed to take over management of TICC’s assets. As a
stockholder of TICC, we urge you to focus on what matters most to you:
immediate, substantial and sustainable value. At this point, the only
proposal that delivers immediate, substantial and sustainable value to
stockholders is the TSLX proposal. Any debate over external managers
is only a distraction from the simple, compelling facts of our proposal.
As stockholders, you should push these other entities to clarify how you
would directly and immediately benefit from transactions that pay
external managers and board members instead of stockholders.
In the coming days, TSLX plans to distribute a definitive proxy
statement and accompanying GOLD proxy card to shareholders once they
have been cleared by the SEC. Do not sign or
return any WHITE proxy cards you receive from TICC or, if you do, vote
AGAINST the management proposals.
We remain steadfast in our pursuit of this highly compelling proposal
for TICC and feel passionately that our proposal is in the best interest
of stockholders. YOUR VOTE CAN HELP UNLOCK THIS VALUE FOR
STOCKHOLDERS. By voting AGAINST the proposals related to the Benefit
Street Partners transaction you will send a clear message to the TICC
special committee that stockholders are fed up with its value
destructive leadership and demand that the special committee engage
on our highly compelling proposal.
3 Wells Fargo - September 17, 2015; Ladenburg Thalman –
September 10, 2015
Sincerely,
Joshua Easterly
Chairman, Board of Directors
Co-Chief
Executive Officer
Michael Fishman
Co-Chief Executive Officer
If you have any questions concerning this letter or TSLX’s proposal,
please
call MacKenzie Partners at one of the phone numbers listed below.
105 Madison Avenue
New York, NY 10016
TPG@mackenziepartners.com
(212) 929-5500 (call collect)
or
TOLL-FREE (800) 322-2885
About TPG Specialty Lending
TPG Specialty Lending, Inc. (“TSLX”, or the “Company”) is a specialty
finance company focused on lending to middle-market companies. The
Company seeks to generate current income primarily in U.S.-domiciled
middle-market companies through direct originations of senior secured
loans and, to a lesser extent, originations of mezzanine loans and
investments in corporate bonds and equity securities. The Company has
elected to be regulated as a business development company, or a BDC,
under the Investment Company Act of 1940 and the rules and regulations
promulgated thereunder. TSLX is externally managed by TSL Advisers, LLC,
a Securities and Exchange Commission (“SEC”) registered investment
adviser. TSLX leverages the deep investment, sector, and operating
resources of TPG Special Situations Partners, the dedicated special
situations and credit platform of TPG, with over $12 billion of assets
under management, and the broader TPG platform, a global private
investment firm with over $74 billion of assets under management. For
more information, visit the Company’s website at www.tpgspecialtylending.com.
Forward-Looking Statements
Information set forth herein includes forward-looking statements. These
forward-looking statements include, but are not limited to, statements
regarding TSLX proposed business combination transaction with TICC
Capital Corp. (“TICC”) (including any financing required in connection
with the proposed transaction and the benefits, results, effects and
timing of a transaction), all statements regarding TPG Specialty
Lending, Inc.’s (“TSLX”, or the “Company”) (and TSLX and TICC’s
combined) expected future financial position, results of operations,
cash flows, dividends, financing plans, business strategy, budgets,
capital expenditures, competitive positions, growth opportunities, plans
and objectives of management, and statements containing the words such
as “anticipate,” “approximate,” “believe,” “plan,” “estimate,” “expect,”
“project,” “could,” “would,” “should,” “will,” “intend,” “may,”
“potential,” “upside,” and other similar expressions. Statements set
forth herein concerning the business outlook or future economic
performance, anticipated profitability, revenues, expenses, dividends or
other financial items, and product or services line growth of TSLX (and
the combined businesses of TSLX and TICC), together with other
statements that are not historical facts, are forward-looking statements
that are estimates reflecting the best judgment of TSLX based upon
currently available information.
Such forward-looking statements are inherently uncertain, and
stockholders and other potential investors must recognize that actual
results may differ materially from TSLX’s expectations as a result of a
variety of factors, including, without limitation, those discussed
below. Such forward-looking statements are based upon management’s
current expectations and include known and unknown risks, uncertainties
and other factors, many of which TSLX is unable to predict or control,
that may cause TSLX’s plans with respect to TICC, actual results or
performance to differ materially from any plans, future results or
performance expressed or implied by such forward-looking statements.
These statements involve risks, uncertainties and other factors
discussed below and detailed from time to time in TSLX’s filings with
the Securities and Exchange Commission (“SEC”).
Risks and uncertainties related to the proposed transaction include,
among others, uncertainty as to whether TSLX will further pursue, enter
into or consummate the transaction on the terms set forth in the
proposal or on other terms, potential adverse reactions or changes to
business relationships resulting from the announcement or completion of
the transaction, uncertainties as to the timing of the transaction,
adverse effects on TSLX’s stock price resulting from the announcement or
consummation of the transaction or any failure to complete the
transaction, competitive responses to the announcement or consummation
of the transaction, the risk that regulatory or other approvals and any
financing required in connection with the consummation of the
transaction are not obtained or are obtained subject to terms and
conditions that are not anticipated, costs and difficulties related to
the integration of TICC’s businesses and operations with TSLX’s
businesses and operations, the inability to obtain, or delays in
obtaining, cost savings and synergies from the transaction, unexpected
costs, liabilities, charges or expenses resulting from the transaction,
litigation relating to the transaction, the inability to retain key
personnel, and any changes in general economic and/or industry specific
conditions.
In addition to these factors, other factors that may affect TSLX’s
plans, results or stock price are set forth in TSLX’s Annual Report on
Form 10-K and in its reports on Forms 10-Q and 8-K.
Many of these factors are beyond TSLX’s control. TSLX cautions investors
that any forward-looking statements made by TSLX are not guarantees of
future performance. TSLX disclaims any obligation to update any such
factors or to announce publicly the results of any revisions to any of
the forward-looking statements to reflect future events or developments.
Third Party-Sourced Statements and Information
Certain statements and information included in this communication have
been sourced from third parties. TSLX does not make any representations
regarding the accuracy, completeness or timeliness of such third party
statements or information. Permission to cite such statements or
information has neither been sought nor obtained from such third
parties. Any such statements or information should not be viewed as an
indication of support from such third parties for the views expressed
herein. All information in this communication regarding TICC, including
its businesses, operations and financial results, was obtained from
public sources. While TSLX has no knowledge that any such information is
inaccurate or incomplete, TSLX has not verified any of that information.
TSLX reserves the right to change any of its opinions expressed herein
at any time as it deems appropriate. TSLX disclaims any obligation to
update the data, information or opinions contained herein.
Proxy Solicitation Information
The information set forth herein is provided for informational purposes
only and does not constitute an offer to purchase or the solicitation of
an offer to sell any securities. TSLX has filed a preliminary proxy
statement and accompanying GOLD proxy card with the SEC to be used to
solicit votes at a special meeting of stockholders of TICC scheduled to
be held on October 27, 2015 against (a) approval of the new advisory
agreement between TICC and TICC Management, LLC (the “Adviser”), to take
effect upon a change of control of the Adviser in connection with the
entrance of the Adviser into a purchase agreement with an affiliate of
Benefit Street Partners L.L.C. (“BSP”), pursuant to which BSP will
acquire control of the Adviser, (b) the election of six directors
nominated by TICC’s board of directors, and (c) the proposal to adjourn
the meeting if necessary or appropriate to solicit additional votes.
TSLX STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE TSLX
PROXY STATEMENT AND ITS OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. SUCH TSLX PROXY MATERIALS
ARE AND WILL BECOME AVAILABLE AT NO CHARGE ON THE SEC’S WEB SITE AT HTTP://WWW.SEC.GOV
AND AT TSLX’S WEBSITE AT HTTP://WWW.TPGSPECIALTYLENDING.COM.
IN ADDITION, TSLX WILL PROVIDE COPIES OF THE PROXY STATEMENT WITHOUT
CHARGE UPON REQUEST. REQUESTS FOR COPIES SHOULD BE DIRECTED TO TSLX’S
PROXY SOLICITOR AT TPG@MACKENZIEPARTNERS.COM.
The participant in the solicitation is TSLX and certain of its directors
and executive officers may also be deemed to be participants in the
solicitation. As of the date hereof, TSLX directly beneficially owned
1,633,660 shares of common stock of TICC.
Security holders may obtain information regarding the names,
affiliations and interests of TSLX’s directors and executive officers in
TSLX’s Annual Report on Form 10-K for the year ended December 31, 2014,
which was filed with the SEC on February 24, 2015, its proxy statement
for the 2015 Annual Meeting, which was filed with the SEC on April 10,
2015 and certain of its Current Reports on Form 8-K. These documents can
be obtained free of charge from the sources indicated above. Additional
information regarding the interests of these participants in the proxy
solicitation and a description of their direct and indirect interests,
by security holdings or otherwise, will also be included in any proxy
statement and other relevant materials to be filed with the SEC when
they become available.
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