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Sierra Income Corporation Seeking Shareholder Approval for Medley Merger – Investors May Suffer Significant Losses

Money WhirlpoolOn November 6, 2018, Sierra Income Corporation (“Sierra”) filed a Registration Statement (on Form N-14) with the SEC, notifying Sierra investors and the public at large of a proposed merger transaction.  Specifically, Sierra’s board of directors is seeking shareholder approval on a series of related transactions designed to effectuate a merger between and among Sierra, a publicly registered non-traded business development company (BDC), as well as Medley Capital Corporation (“MCC”), a publicly traded BDC, and Medley Management Inc. (“MDLY”), a publicly traded asset management firm.

MDLY is the parent company of both MCC’s and Sierra’s investment adviser, and the same portfolio management team and officers are responsible for both MCC’s and Sierra’s operations.  While a date for a special shareholder meeting has yet to be set, Sierra’s board of directors is seeking shareholder approval on the contemplated merger, a transaction which will reportedly create the second largest internally managed and seventh largest publicly traded BDC.

Sierra is currently externally managed by SIC Advisors LLC, which in turn, is affiliated with MDLY.  MDLY operates a national direct origination franchise through which it seeks to market its financial products, including Sierra.  As of December 31, 2016, Sierra reported that it had raised in excess of $900 million in connection with its equity capital raise.  As of July 31, 2018, Sierra had closed its public offering.  Most recently, shares of Sierra have been assigned a NAV of $7.27 per share by management, and has reported approximately $1.1 billion in total assets.

Under the terms of the contemplated merger, MCC shareholders will receive 0.8050 shares of Sierra stock for each existing share they currently hold.  Further, MDLY shareholders will receive 0.386 shares of Sierra stock for each Medley Class A share, in addition to $3.44 of additional cash compensation and a special cash dividend of $0.65 per MDLY share.  Current Sierra shareholders will continue to hold their shares of Sierra stock, but in a publicly traded BDC.  The contemplated merger is cross conditioned on approval by Sierra, MCC, and MDLY shareholders, regulatory review, and other customary closing conditions.  It is anticipated that the transaction will close in early 2019.

Investors who participated in Sierra’s offering acquired shares at $10 per share.  Moreover, as set forth in Sierra’s initial prospectus, investors who participated in the offering were subject to considerable up-front fees and commissions of nearly 10%, including a “selling commission” of 7.00%, in addition to a “dealer-manager fee” of 2.75%.  While the contemplated merger has yet to garner shareholder approval, Sierra investors are cautioned to monitor the situation as it develops.  In particular, MCC’s share price has dramatically underperformed broad market indices over the past 3-5 years (e.g., from a high of approx. $16 per share in March 2013, MCC currently trades at less than $4 per share), including its market cap decreasing from more than $800 million to less than $200 million as of today.

Persons who have sustained losses in Sierra (or another non-traded investment) may be able to recover damages in FINRA arbitration.  Investors may contact Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or via email at for a no-cost, confidential consultation.  Attorneys at the firm are admitted in New York and Wisconsin and various federal courts around the country, and handle cases nationwide (in cooperation with attorneys located in those states if required by applicable rules).

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