Certain LCM Transaction Matters
The Master Fund and a newly created wholly-owned subsidiary of the Master Fund, Tetragon Capital Management LLC (“TCM”), have entered into a definitive agreement with Calyon New York Branch and certain of its affiliates (collectively, “Calyon”) under which TCM will acquire Lyon Capital Management LLC (“LCM”) and the Master Fund will acquire certain collateralized loan obligations (“CLOs”) securities (the “Purchase Transaction”).
In connection with the Purchase Transaction, (i) Polygon Management LP (“PM”), an affiliate of the Investment Manager, will purchase from TCM 25% of the limited liability company interests of LCM (the “Joint Venture Interests”) and (ii) LCM will enter into an operating services agreement (the “Operational Infrastructure Agreement”) with the Services Providers, which are also affiliates of the Investment Manager, as the exclusive providers to LCM of operational, financial control, trade execution, legal, compliance, administration, payroll, employee benefits, strategic planning and other operational infrastructure services, as requested by LCM. The Investment Manager will continue to be responsible for the management of all of the Master Fund’s investments, including LCM, in all respects. Under the Operational Infrastructure Agreement, the Services Providers will be entitled to compensation for such services based on an allocation of costs relating to the services provided by them to LCM; no mark-up will be applied to the cost allocation. The independent auditors of the Master Fund and TFG will review the cost allocation methodology and will audit the application of such methodology to costs (although they will not evaluate the reasonableness of the relative allocations used). The Operational Infrastructure Agreement (i) will be terminable by LCM at any time for cause, if there is a change of control of the Service Providers and at certain intervals without cause, in each case with the approval of the Board of Directors of the Master Fund (including with the vote of a majority of the Directors that are not interested in such transaction), in addition to other termination provisions, and (ii) will contain indemnification and exculpation provisions in favor of the Services Providers on substantially the same terms as are contained in the Services Agreement. In the event that the Operational Infrastructure Agreement is terminated for cause by LCM, the Joint Venture Interests held by PM will be forfeited and will revert to TCM.
The material facts as to any Director’s interest in the purchase and sale of the Joint Venture Interests and the matters contemplated by the Operational Infrastructure Agreement have been disclosed to the Directors. The Master Fund obtained an opinion from a recognized investment bank that the purchase price to be paid by the Master Fund and TCM for the assets in the Purchase Transaction is fair to the Master Fund from a financial point of view after giving effect to the purchase and sale of the of the Joint Venture Interests and the Operational Infrastructure Agreement. This opinion was provided to the Directors. The Independent Directors, with the advice of independent counsel, reviewed the proposed terms of the Joint Venture Interests and the Operational Infrastructure Agreement, and, along with the remaining Directors, voted unanimously to approve the sale of the Joint Venture Interests to PM and the entry by LCM into the Operational Infrastructure Agreement with the Services Providers.
The foregoing information is historic having been published in connection with the announcement of the transaction. Accordingly, certain information may have been superseded by subsequent disclosure and announcements.