Thursday, 31 July 2014
Last updated 9 hours ago
Mar 22 2012 | 12:25pm ET
A fund of hedge funds and one of its underlying manager have unleashed a wave of litigation against one another.
First, in December, Fintan Partners filed a redemption request, seeking its $45 million back from Medley Capital, which manages $1.4 billion. The fund of funds followed that with a lawsuit, accusing Medley and two of its three remaining founders of stripping the hedge fund to raise permanent capital—and a permanent source of fee income.
At issue in the February lawsuit is Medley's decision to transfer six of its income-producing assets—accounting for about 10% of its assets under management—to a holding company, Medley Capital Corp., and then taking that company public, raising $100 million.
Medley investors, of course, received shares of that company, at $14.75 a piece, $2.75 more than its initial public offering price. The shares are now trading for $11.30.
Fintan eventually withdrew the lawsuit filed last month, which complained that Medley has sold none of the shares allocated to the hedge fund and that further share sales would further drive down the share price.
Medley countered with a lawsuit in the Cayman Islands, asking the court to declare a 2007 side-letter between the two sides giving Fintan the right to redeem (and be paid in cash) nullified. According to Medley, the deal was rendered moot when Medley restructured.
Now, Fintan is back in court, accusing Medley of breach of contract over—you guessed it—the side-letter. Neither side is commenting, other than via litigation.
Jul 8 2014 | 10:48am ET
The surge in derivatives regulation is among the most complex challenges facing the financial services industry today. Northern Trust’s Joshua Satten recently spoke with FINalternatives to share insights into the challenges presented by new regulation and explore how the industry is responding. Read more…