Ortelius Rejects ISS’ Recommendation that Capital Senior Living’s Stockholders Vote for a Costly, Dilutive and Poorly-Structured Deal when Superior Financing Alternatives are Readily Available
11 Octobre 2021 - 12:30PM
Business Wire
Believes ISS Issued a Flawed and
Unorthodox Recommendation for “Cautionary Support” Based on Capital
Senior Living’s Hyperbolic and Unsupported Claims of Insolvency
Risks
Highlights that Capital Senior Living’s
Disclosures Show the Company’s Financial Position has been
Dramatically Improving and Occupancy Rates are Returning to
Pre-Pandemic Levels
Reiterates Ortelius is Committed to
Immediately Infusing $30 Million in Contingency-Free Capital via a
Rights Offering, While Noting Invictus Publicly Committed to
Immediately Infusing $25 Million in Contingency-Free Capital as
Part of its Seemingly Superior $150 Million Public Proposal
Underscores that Ortelius and Others have
Attempted to Engage with the Company Regarding Alternative
Financing Solutions, but the Board Signed
Away its Fiduciary Out and Remains Legally Prevented from
Discussing Alternatives Until the Conversant Deal is Voted
Down
Urges Stockholders to Protect Their
Investment from Punitive and Unnecessary Dilution by Voting
AGAINST the Amended Transactions at
the October 22nd Special Meeting
Ortelius Advisors, L.P. (together with its affiliates,
“Ortelius” or “we”), which owns approximately 12.7% of the
outstanding common stock of Capital Senior Living Corporation
(NYSE: CSU) (“Capital Senior Living” or the “Company”), today
responded to the recommendation issued by Institutional Shareholder
Services, Inc. (“ISS”) regarding the Company’s amended financing
transactions (the “Amended Transactions”) with Conversant Capital
LLC (together with its affiliates, “Conversant”). The Amended
Transactions are also supported by Arbiter Partners QP, LP
(“Arbiter”) and Silk Partners, LP (“Silk”), who each received
special consideration in exchange for signing voting agreements
with the Company. Ortelius urges Capital Senior Living’s
stockholders to vote AGAINST
all of the Company’s proposals, including the Amended Transactions,
on the GOLD proxy card at the upcoming meeting of stockholders (the
“Special Meeting”) on October 22, 2021. Voting down the Amended
Transactions will enable the Board of Directors (the "Board") to
pursue readily-available financing alternatives being championed by
existing stockholders. Please visit www.SaveCSU.com for all
documents and presentations pertaining to our advocacy on behalf of
all of the Company’s stockholders.
Peter DeSorcy, Managing Member of Ortelius, commented:
“We firmly believe ISS erred by recommending ‘cautionary
support’ for the costly, dilutive and poorly-structured Amended
Transactions that would seize significant value from existing
stockholders and hand de facto control of Capital Senior Living to
Conversant and Silk following their privately-negotiated agreement.
We question how ISS can provide ‘cautionary support’ for this type
of deal on one hand, while acknowledging the existence of 'a
competing offer that could address the company's capital needs with
less dilution' on the other hand. The fact is that Ortelius and
other stockholders, such as Invictus Global Management LLC
("Invictus"), have made public commitments to promptly provide
affordable, contingency-free and potentially non-dilutive capital
to address the Company’s liquidity needs. It appears ISS overlooked
that the Ortelius and Invictus proposals include an immediate
injection of $55 million, and that the Invictus terms include a
subsequent $75 million in the form of a backstopped rights offering
for a convertible instrument that could mitigate dilution for
participants and minimize leverage over time. We see absolutely no
need to vote for the Amended Transactions, which include punitive
dilution and give away control of the business at a discount to a
subset of stockholders who struck a secret agreement at the expense
of all other investors.
It appears that the only reason ISS tepidly supported the
Amended Transactions is because they provide a degree of
'certainty.’ However, there are existing stockholders committed to
providing immediate capital on far better terms. We believe the
Ortelius and Invictus commitments represent the highest level of
certainty possible without investors having the ability to
negotiate with the Company due to its extremely questionable
decision to give up its right to negotiate with parties offering
superior alternative financing. Ortelius invites all fellow
stockholders – large and small – to engage with us to understand
our analysis of the Company’s capital needs and the
readily-available financing alternatives that exist.”
Here are just a few of the key facts that reinforce why the
Amended Transactions are the wrong path forward for the Company's
stockholders:
- Capital Senior Living’s October 7th
claim that voting down the Amended Transactions will lead to
“insolvency” is unsupported by any publicly-available financial
analysis – this hyperbolic claim leads us to believe
that the Company’s leadership, which is economically incentivized
and contractually required to support the Conversant deal, will
continue to say anything to try to secure votes. It is a fact that
Capital Senior Living’s Board signed away its fiduciary out and
right to engage on a superior alternative financing when it signed
the Conversant deal.
- Capital Senior Living’s Amended
Transactions were the byproduct of the Board and Conversant
privately securing the support of Arbiter and Silk, who are now
receiving special financial and governance benefits at the expense
of all other stockholders – we cannot see how any
engaged stockholder could support an egregiously dilutive and
questionable deal that appears to include unseemly bribes. It is a
fact that Ortelius and others have each tried to engage with
Capital Senior Living about far better alternatives, but the
Company is unable to engage because of its restrictive agreement
with Conversant.
- Capital Senior Living’s own
disclosures show that its fundamentals and financial position are
dramatically improving – in addition to the fact that
occupancy rates are almost at pre-pandemic levels, the Company
already extended its loan with BBVA Bancshares, Inc. for 12 months
and the vast majority of its remaining near-term debt is
non-recourse and well over-collateralized. The fact that other
capital providers were not available in the spring does not mean
stockholders should support a terrible deal now, when multiple
parties are putting forth viable proposals. We believe all
stockholders, including long-suffering stockholders, can enjoy the
full extent of Capital Senior Living’s post-pandemic recovery if
the Amended Transactions are voted down. If the overhang of massive
dilution is eliminated, we suspect the Company’s stock price could
rebound to its one-year high of more than $57 in the near-term, and
the long-term value creation could be even more significant.
- Capital Senior Living has multiple
financing alternatives that can be promptly executed as soon as the
Amended Transactions are voted down on October 22nd –
Ortelius has publicly committed to immediately infusing $30 million
into the business via a rights offering, while Invictus has
publicly disclosed a $150 million proposal that is potentially
non-dilutive and includes an immediate $25 million non-contingent
bridge loan. The firm has committed to providing the non-contingent
bridge loan to keep the Company solvent while it performs
accelerated confirmatory diligence that supplements its prior
analysis. We support the firm’s $150 million construct, which is
less costly and would significantly extend the debt maturities for
the benefit of all stakeholders.
About Ortelius Advisors,
L.P.
Ortelius is a research-intensive, fundamental-based,
activist-oriented alternative investment management firm focused on
event-driven opportunities. Founded in 2015 by Peter DeSorcy and
H.R.H. Prince Pavlos, the asset manager is based in New York
City.
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Stockholders: Okapi Partners Mark Harnett, 646-556-9350
mharnett@okapipartners.com Media: MKA Greg Marose / Charlotte
Kiaie, 646-386-0091 gmarose@mkacomms.com / ckiaie@mkacomms.com
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