Item 8.01 Other Events.
On May 27, 2021, our largest advisory client, Sierra Income Corporation
("Sierra"), issued a press release announcing that Sierra's board of directors
had entered into a formal review process to evaluate strategic alternatives for
Sierra. Sierra's press release stated that Sierra's board of directors has
authorized the special committee of Sierra's board to lead such process, with
the special committee of Sierra's board having engaged a financial advisor.
Sierra's press release further stated that Sierra's board of directors has not
set a timetable for the conclusion of the strategic alternatives review, that
there can be no assurance that the review will result in any form of
transaction, and that Sierra does not intend to comment further regarding the
review unless or until it determines that further disclosure is appropriate or
required by law.
Sierra is a business development company and our sole permanent capital vehicle,
and is currently externally managed and advised by SIC Advisors LLC, an
affiliate of Medley Management Inc. ("MDLY") and Medley LLC ("Medley LLC," and
together with MDLY, "Medley"). For the years ended December 31, 2020 and 2019,
Sierra represented approximately 44.3% and 41.2%, respectively, of
Medley's total revenues, excluding investment income. In the event the review
process being undertaken by Sierra were to result in termination of Medley's
advisory agreement with Sierra, such event would have a significant and material
adverse effect on Medley's business and prospects and we believe that Medley
would likely not be able to continue operations.
MDLY and Medley LLC are in the process of evaluating the Sierra announcement and
the potential impact of the review process being undertaken by Sierra on
Medley's business. As previously reported, Medley LLC filed a voluntary petition
for Chapter 11 relief on March 7, 2021 (the "Medley LLC Chapter 11 Case"), and
on May 13, 2021 withdrew its original plan of reorganization submission. Medley
LLC is exploring its options in light of the Sierra announcement and evaluating
next steps in the Medley LLC Chapter 11 Case.
Cautionary Notice Regarding Forward-Looking Statements
This Current Report on Form 8-K contains forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995 and such
statements are intended to be covered by the safe harbor provided by the same.
These statements are based on the current beliefs and expectations of Medley's
management and are subject to significant risks and uncertainties. The above
statements regarding the review process undertaken by Sierra, statements
regarding the potential effects and implications of Sierra's review process,
including without limitation on Medley's business and/or the Medley LLC Chapter
11 Case, and statements regarding any actions taken by MDLY and/or Medley LLC in
connection with the Sierra announcement including statements regarding
evaluations of the potential impact on the Medley business and exploration of
options and next steps in light of the Sierra announcement, and other statements
containing the words "believes," "anticipates," "plans," "expects," "will" and
similar expressions, constitute forward-looking statements that are based on
Medley's current expectations. Because these forward-looking statements involve
risks and uncertainties, there are important factors that could cause
Medley's actual results, as well as Medley's expectations regarding materiality
or significance, to differ materially from those in the forward-looking
statements. These factors include, but are not limited to, the following: (i)
the outcome of the formal review process undertaken by Sierra, and whether
Sierra's review process results in a termination of Medley's advisory agreements
with Sierra; (ii) the outcome of the Medley LLC Chapter 11 Case and Medley LLC's
ability to successfully reorganize and emerge from bankruptcy protection; (iii)
Medley LLC's ability to develop and propose an amended Chapter 11 Plan of
Reorganization of Medley LLC ("Plan"), successfully attain Bankruptcy Court
confirmation of any such amended Plan that Medley LLC may propose, and
thereafter successfully consummate and implement such Plan in accordance with
the terms thereof; as previously reported in our Current Report on Form 8-K
filed on May 13, 2021, pursuant to filings with the Bankruptcy Court, on May 13,
2021, Medley LLC withdrew its original Plan and Disclosure Statement; Medley LLC
has to date been unable to successfully develop an amended Plan and an amended
Disclosure Statement; (iv) since the commencement of Medley LLC's Chapter 11
proceedings we have experienced and may continue to experience certain adverse
effects on our business, including employee attrition, client attrition and a
reduction in assets under management; (v) whether the Bankruptcy Court will
confirm any amended plan of reorganization that Medley LLC may develop and
propose (there being the risk that any amended plan of reorganization that
Medley LLC may propose may never be confirmed by the Bankruptcy Court or become
effective; (vi) additional risks related to the Medley LLC Chapter 11 Case and
any reorganization in connection therewith, including, but not limited to, risks
associated with any reorganization that Medley LLC may pursue (including but not
limited to risks associated with potential changes to our capital structure),
the Bankruptcy Court may grant or deny motions in a manner adverse to Medley
LLC, claims that may not be discharged in the Medley LLC Chapter 11 Case,
adverse publicity in connection with Medley LLC's bankruptcy petition, the
impact of the Medley LLC Chapter 11 Case on our overall future financial
performance, and risks related to trading in our securities during the pendency
of the Medley LLC Chapter 11 Case; (vii) in the event Medley LLC is unable to
successfully develop an amended Plan, or any such Plan that Medley LLC proposes
fails to attain confirmation of the Bankruptcy Court, Medley LLC may have no
suitable alternatives reasonably available to it other than a liquidation under
Chapter 11 of the Bankruptcy Code, or to convert the Medley LLC Chapter 11 Case
into a liquidation case under Chapter 7 of the Bankruptcy Code, in which event a
Chapter 7 trustee would be appointed to liquidate Medley LLC's assets for
distribution in accordance with the priorities established by the Bankruptcy
Code; (viii) our ability to continue as a going concern; (ix) the outcome of,
the timeframe for, and the ultimate resolution of the matters raised by the
Wells Notices received by MDLY, Medley LLC and certain pre-IPO owners of Medley
LLC, including whether any enforcement action will be brought and the full
extent of the potential implications thereof; any adverse outcome in connection
therewith could have a material effect on our business, financial condition, or
results of operations; (x) difficult market and political conditions; (xi) our
success in retaining or recruiting, or changes required in, our officers, key
employees or directors; (xii) our ability to successfully compete for and retain
fund investors, assets, professional talent and investment opportunities; (xiii)
our ability to successfully formulate and execute our business, investment and
growth strategies; (xiv) our financial performance; (xv) our ability to
consummate or successfully integrate development opportunities, acquisitions or
joint ventures; (xvi) our ability to manage conflicts of interest; (xvii) our
assumptions relating to our operations, investment performance, financial
results, financial condition, business prospects, growth strategy and liquidity;
(xviii) the uncertain effect of COVID-19 or other future pandemics or events on
our business, operating results and financial condition, including disruption to
our customers, our employees, the global economy and financial markets; and
(xix), our ability to regain and maintain compliance with NYSE continued listing
requirements and our ability to maintain our NYSE listing.
All forward-looking statements made herein speak only as of the date of this
Current Report on Form 8-K. Except as required by law, MDLY undertakes no
obligation to update the forward-looking statements to reflect the impact of
circumstances or events that may arise after the date of the forward-looking
statements. For a discussion of a variety of risk factors affecting MDLY's
business and prospects, see "Risk Factors" in MDLY's annual and quarterly
reports filed with the SEC including, but not limited to, its Annual Report on
Form 10-K for the fiscal year ended December 31, 2020, which has been filed with
the SEC and is available on our website (www.mdly.com) and on the SEC's website
(www.sec.gov).
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