CHEVY CHASE, Md., April 17, 2018 /PRNewswire/ -- Roumell Asset Management, LLC (www.roumellasset.com) owns roughly 1.1 million shares of Medley Capital Corporation (MCC), or approximately 2.1% of MCC's outstanding shares as of February 5, 2018. We are writing to express concern about the significant shareholder value deterioration over the last several quarters and to make a specific recommendation that will enhance shareholder value and close the substantial discount between MCC's reported net asset value and stock price. MCC's near-50% discount to its NAV is the largest in the BDC space and underscores investor disillusionment with management.
We also want to highlight that the Independent Directors' interests are not adequately aligned with the shareholders of MCC. The lack of any meaningful stock ownership by the Independent Board Directors speaks to the lack of conviction these individuals have in the management of MCC's portfolio. This lack of alignment of interests is particularly concerning because three of the four Independent Directors have served on the Board since 2011 and provided oversight during the period of poor underwriting decisions (2011 to 2014) where MCC underwrote second lien exposures which were primarily responsible for the significant shareholder value destruction.
We believe the Board of Directors should immediately undertake a serious effort to sell the business (the underlying investment portfolio and the management agreement). We believe there is an attractive market for MCC's investment portfolio well above where MCC's current stock trades.
Triangle Capital Corporation's (TCAP) recently announced decision to sell itself to Barings provides a clear roadmap of how best to maximize shareholder value for a deeply discounted BDC that has lost credibility with investors. While we have no special insight into the TCAP transaction, our understanding from published documents is that TCAP shareholders will receive cash and shares in an externally managed BDC. Barings would be the advisor to the BDC. TCAP's portfolio would be sold to a third party for 97% of its December 31, 2017 fair value. Selling the MCC portfolio at 97% of the current fair value would obviously create tremendous appreciation for your owners. Additionally, MCC's portfolio has a higher percentage of first lien credits than TCAP and could possibly capture a price higher than 97%. On what basis can the Board defend a decision to not put MCC up for sale after witnessing the results of TCAP's process?
We support and encourage a constructive and ongoing dialogue between the Board and the company's owners and encourage all shareholders to express their views to management. We request that you address the above matters with a sense of urgency.