Western Investment Sends Letter to Sunset Financial Resources, Inc. Board
19 Giugno 2006 - 5:04PM
Business Wire
Western Investment LLC announced that it had sent the following
letter to the Board of Directors of Sunset Financial Resources,
Inc. (NYSE: SFO). -0- *T WESTERN INVESTMENT LLC 2855 East
Cottonwood Parkway, Suite 110 Salt Lake City, Utah 84121 June 16,
2006 Sunset Financial Resources, Inc. 10245 Centurion Parkway
North, Suite 305 Jacksonville, Florida 32256 Attention: Board of
Directors Gentlemen: *T Western Investment LLC, together with
certain of its affiliates, is the beneficial owner of an aggregate
of 1,016,300 shares of common stock of Sunset Financial Resources,
Inc., a Maryland corporation ("Sunset" or the "Company"),
representing approximately 9.7% of Sunset's outstanding common
stock. As the beneficial holders of a significant number of the
Company's shares, we are deeply concerned about the increasing
disregard for stockholder interests that the Board of Directors has
displayed over the past several months, culminating in the decision
to merge with Alesco Financial Trust. Since August 2005, the Board
has taken the following actions to the detriment of Sunset
stockholders: -- Making it more difficult for Sunset stockholders
to call a special meeting by increasing the percentage of the
outstanding shares required to call a special meeting from 25% to
50%; -- Implementing complex procedures governing
stockholder-requested special meetings and advance notice of
stockholder nominees for directors; -- Refusing to appoint a
stockholder representative to fill a vacancy that existed on the
Board; and -- Failing to hold an annual meeting for the election of
directors on a timely basis consistent with past practice. The
crowning blow, however, was delivered to stockholders by way of
Sunset's proposed merger with Alesco. Alesco is a private company
(1) that commenced operations less than five months ago, (2) for
which sophisticated investors paid $10.00 per share on January 31,
2006 and (3) whose book value was $9.40 per share on March 31, 2006
as opposed to Sunset's book value on such date of $10.42 per share.
Yet, in the proposed merger, Sunset is offering Alesco stockholders
a premium of 1.26 Sunset shares for each Alesco share, effectively
valuing Alesco at $13.13 per share. In addition, as a result of the
proposed merger, Sunset's senior executive officers will receive a
severance package estimated by Sunset to be between $2.3-$2.7
million. Furthermore, Cohen Brothers Management, Alesco's external
manager, is already earning a 1.5% management fee to manage
Sunset's assets, which are being transitioned into assets
consistent with Alesco's investment strategy, a fundamental change
in Sunset's investment strategy that occurred without first
obtaining stockholder approval. We question the wisdom of
fundamentally changing Sunset's investment strategy to invest in
what we believe to be a highly leveraged portfolio of
credit-sensitive assets at this point in the business cycle. It
appears that everyone wins in the proposed merger, except for
Sunset's stockholders, who will suffer a dilution in the book value
of their shares from $10.42 to $7.77. We do not understand how the
proposed Alesco merger could possibly be viewed as maximizing
stockholder value. We do not believe the terms of the currently
proposed merger are advisable or in the best interests of Sunset's
stockholders. It is our current intention to vote against the
proposed merger. We also believe that the Board has superior
alternatives to the merger other than liquidating the Company or
simply "staying the course," one of which is to actively pursue
better management for the Company. We have had discussions with
Michael Tokarz regarding his (or his affiliate) managing all or a
portion of Sunset's portfolio. Mr. Tokarz has over 30 years of
lending and investment experience, including, currently, as
Chairman and Portfolio Manager of MVC Capital, Inc. (NYSE: MVC), a
publicly traded business development company that makes private
debt and equity investments; and as Chairman of The Tokarz Group, a
private merchant bank that he founded; and, formerly, as a General
Partner with Kohlberg Kravis Roberts & Co. (KKR), one of the
world's most experienced private firms. We believe that Mr. Tokarz
is a superior portfolio manager with an exceptional record, and
that the Board should explore fully the opportunity to retain his
services. We would like to discuss this matter further to determine
if we can reach an amicable resolution to our concerns relating to
the future direction of the Company and the maximization of
stockholder value. We sincerely hope that the Board will
demonstrate a similar commitment to Sunset stockholders by
favorably responding to our request. Please note, however, that, if
an amicable resolution cannot be reached, we are prepared to take
any and all actions to protect stockholder interests, including
proceeding with a solicitation to oppose the proposed merger. We
request that any correspondence concerning this matter be delivered
to the undersigned at the address set forth above and copies of
such correspondence should also be simultaneously delivered to our
counsel, Olshan Grundman Frome Rosenzweig & Wolosky LLP, Park
Avenue Tower, 65 East 55th Street, New York, New York 10022,
Attention: Steven Wolosky, Esq., telephone (212) 451-2333,
facsimile (212) 451-2222. -0- *T Sincerely, WESTERN INVESTMENT LLC
By:/s/ Arthur D. Lipson Arthur D. Lipson Sole Member *T CERTAIN
INFORMATION CONCERNING PARTICIPANTS Western Investment LLC,
together with the other Participants (as defined below) named
herein (collectively, the "Western Group"), intend to make a
preliminary filing with the Securities and Exchange Commission of a
proxy statement and accompanying proxy card to be used to solicit
votes against the proposed merger involving the Company and Alesco
Financial Trust and related proposals to be submitted to a vote of
the stockholders of the Company at a special meeting of
stockholders to be called by the Company. THE WESTERN GROUP
STRONGLY ADVISES ALL STOCKHOLDERS OF THE COMPANY TO READ THE PROXY
STATEMENT AND OTHER PROXY MATERIALS AS THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. SUCH PROXY
MATERIALS WILL BE AVAILABLE AT NO CHARGE ON THE SECURITIES AND
EXCHANGE COMMISSION'S WEB SITE AT HTTP://WWW.SEC.GOV. IN ADDITION,
THE PARTICIPANTS IN THE SOLICITATION WILL PROVIDE COPIES OF
DEFINITIVE PROXY MATERIALS, WITHOUT CHARGE, UPON REQUEST. REQUESTS
FOR COPIES SHOULD BE DIRECTED TO THE PARTICIPANTS' PROXY SOLICITOR,
INNISFREE M&A INCORPORATED, AT ITS TOLL-FREE NUMBER: (888)
750-5834. The participants in the solicitation are anticipated to
be Western Investment LLC, Western Investment Hedged Partners LP,
Western Investment Institutional Partners LLC, Western Investment
Activism Partners LLC, Arthur D. Lipson, Matthew S. Crouse, James
S. Schallheim, D. James Daras, Marshall W. Coburn and Gerald
Hellerman (collectively, the "Participants"). Information regarding
the Participants and their direct or indirect interests is
available in their Schedule 13D initially filed with the Securities
and Exchange Commission on March 17, 2005, as subsequently amended
on March 29, 2005, May 6, 2005, August 29, 2005, September 23,
2005, October 4, 2005, November 1, 2005, December 5, 2005, December
13, 2005 and May 3, 2006.
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