SIERRA INCOME MERGER TERMINATION CAUSING INVESTMENT LOSS
The Frankowski Firm is investigating potential claims related to investor losses in the Sierra Income Corporation. Sierra is a non-traded business development company (“BDC”). As a non-traded investment, Sierra Income is considered an illiquid and high-risk investment and therefore should never have been recommended or sold to investors who needed cash flow from their investments or were not looking to engage in speculative trading.
On May 5, 2020, Sierra terminated a merger with Medley Capital Corporation due to “changed circumstances and the unpredictable economic conditions caused by the coronavirus pandemic.” The termination has led to a large decline in investment value for Sierra’s investors. Soon after the termination of its merger, Sierra Income announced the temporary suspension of monetary and reinvestment distributions.
Sierra Income Corporation invests in first lien and second lien secured debt, as well as subordinated debt of middle market companies. According to the Sierra Income Fund Prospectus, Sierra Income Fund investors were charged with high fees and expenses, including annual operating expense ratios of 4.34%, annual advisory fees of 1.75%; and front-end distribution costs (dealer fees and commissions) of 10.25%.
Sierra’s investors were likely unaware that only 90% of their funds were actually being invested in the Sierra Income Fund. Sierra concealed a 2.75% dealer management fee and approximately 7% of the funds were used for sales commissions. While some investors began with a value of $10 per share, the current value reported on investor account statements is $5.78 per share – roughly a 40% loss.
If you or someone you know lost money as an investor in the Sierra Income Fund, please call the Frankowski Firm at 888.741.7503 or fill out this contact form.