(Alliance News) - Pollen Street Secured Lending PLC hit back against claims made by its investment manager over a proposed offer by Waterfall Asset Management LLC.
Shares in Pollen Street Secured Lending were down 1.4% at 854.00 pence in London in afternoon trading.
On Tuesday last week, Pollen Street Secured Lending - which invests in credit assets from non-bank lending platforms - gave 12 months' notice to terminate its investment management agreement with PSC Credit, part of Pollen Street Capital, over its handling of a 900 pence per share cash offer from funds advised by Waterfall.
Pollen Street Secured Lending's view was that the manager had not provided all requested information and documentation "to allow the board to make its own proper assessment of what due diligence materials to pass on to the potential offeror."
In response, PSC Credit contested at the time that the offeror's due diligence request document was "unusually extensive" for a public takeover offer and raised concerns about sharing such sensitive information with Waterfall.
In PSC Credit's view, the sharing of such information breached confidentially provisions and would leave Waterfall "in possession of highly confidential information".
Pollen Street Secured Lending believes there is "a position of conflict of interest" regarding the offer. It has also cited "a number of other serious governance issues" with PSC Credit, such as its publishing of information about the company's dividend without the knowledge or permission of the board.
PSC Credit added on Monday this week that it "has always acted with the utmost integrity and in the best interests of all shareholders of [Pollen Street Secured Lending]", even after the Waterfall offer.
It also refuted Pollen Street Secured Lending's claim of "serious, repeated and ongoing breaches" of the investment management agreement between the two firms and added that it "has received legal advice accordingly".
Further, PSC Credit said it had urged Pollen Street Secured Lending to "proceed with caution" after Waterfall requested "significant amounts of information".
PSC Credit said it believed "the requested information was commercially sensitive and was to be provided to Waterfall, a competitor business, without appropriate and customary contractual confidentiality protections, and despite it being unclear whether Waterfall's potential offer would be deliverable."
This is because the 900p per share offer "is significantly below" Pollen Street Secured Lending's net asset value and because "the extent of the information requested as part of the process meant that there would be significant conditionality before any price would be confirmed".
PSC Credit said it tried to meet with Pollen Street Secured Lending's board "on a number of occasions" but that said board "began threatening a breach of the investment management agreement" not even a week after telling PSC Credit of the Waterfall approach.
Lindsey McMurray, managing partner of Pollen Street Capital, said: "Pollen Street Capital has acted with the upmost integrity throughout this process and has sought to fulfil its fiduciary duty as investment manager to always protect the interests of shareholders. Despite numerous attempts to provide expert advice and propose a practical approach since learning of the Waterfall proposal, the board has refused to engage with us constructively and now risks endangering shareholder value. We are committed and ready to assist PSSL however we can for the benefit of all shareholders."
Responding to this, also on Monday, Pollen Street Secured Lending said its board: "Believes that Waterfall's proposal is genuine and serious and is one that, having taken advice, it would be minded to recommend. Waterfall's proposal should not be frustrated by PSC's failure to provide the company with its own information. That information is needed so that the board can form a view as to what would be appropriate to share with Waterfall for the purposes of due diligence."
Moreover, Pollen Street Secured Lending said it is now focused on making sure the Waterfall proposal "is not frustrated through the company's inability to engage constructively". It is "also seeking to ensure that the company's business continues to operate in line with the principles of good corporate governance".
A further announcement and shareholder letter responding to PSC Credit's claims will follow.
Earlier on Monday, Honeycomb Investment Trust PLC said its relationship with investment manager Pollen Street Capital, of which PSC Credit is part, has been "extremely positive".
Robert Sharpe, chair of Honeycomb Investment Trust, said: "I find some of the accusations very hard to believe, as they do not at all reflect the Honeycomb board's relationship with or experience."
By Anna Farley; annafarley@alliancenews.com
Copyright 2020 Alliance News Limited. All Rights Reserved.