TPG Specialty Lending, the BDC that lends to middle market companies, stepped up its fight for rival TICC Capital today as the two sides geared up for a proxy battle.
In a letter dated July 13, TPG Specialty urged TICC Capital shareholders to vote in favor of board nominee T. Kelley Millet at TICC Capital’s annual meeting on Sept. 2. TPG Specialty has tried unsuccessfully to acquire TICC Capital. Millet is CEO of Banca IMI Securities Corp.
TPG is calling to end an ineffective investment advisory agreement between TICC Capital and TICC Management. TPG says TICC Capital shares have grossly underperformed the S&P 500 and the BDC Composite Index since TICC Capital’s IPO in 2003, driven by a 57% decline in NAV. In the meantime, TICC has paid fees of over $140 million to its external adviser and management.
TICC Capital has pursued an unsustainable dividend policy, paying a dividend far exceeding net investment income, TPG Specialty said.
“Do not be fooled! These payments are not comprised solely of investment returns; stockholders are being paid back in part with their own money,” the letter to TICC Capital shareholders said. “More importantly, this strategy has unfortunately resulted in almost irreversible value destruction of NAV per share that will only continue without quick and decisive action.”
TICC Capital has countered with its own board nominee, Tonia Pankopf, who is up for re-election this year. In a letter to its shareholders yesterday, TICC Capital sought support from shareholders to vote in favor of Pankopf and reject TPG Specialty’s plan to terminate its investment advisory agreement with TICC Management.
TICC Capital’s executive officers and directors together hold 5.7% of common stock, the proxy statement filed on July 12 showed. Ahead of the previous shareholder meeting, the board owned 1.8% of common stock, a proxy filed in April 2015 showed.
TICC Capital has also been fighting on another front. NexPoint Advisors, an affiliate of Highland Capital Management, submitted a proposal to cut fees and invest in TICC Capital. In the letter yesterday, TICC Capital told shareholders not to support any potential proposal from NexPoint.
TPG Specialty Lending’s investment portfolio reflects its ongoing interest in TICC. As of March 31, TPG owned 1.6 million TICC shares, representing 0.9% of its portfolio.
TPG has repeatedly said that TICC’s external manager has failed the BDC and, given the chance, TPG could improve returns for shareholders.
“We remain committed to affecting change at TICC,” co-CEO and Chairman Josh Easterly said in an earnings call in May. — Abby Latour
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