BlueMountain Capital Management LLC and affiliated funds reported ownership of 2,599,794 shares in MedEquities Realty Trust Inc., or 8.6% of the company's outstanding common stock, a stake that gives the funds the right to designate two company board members.
In an ownership filing, the funds said they acquired 2,583,686 shares for roughly $38.8 million in a private placement in 2014, and another 16,108 shares, for free, from Elliott Mandelbaum and James Pieri, who the funds appointed to the MedEquities board.
Pursuant to a rights agreement between BlueMountain and MedEquities, the board is required to nominate two BlueMountain directors as long as the funds continue to own 75% or more of the shares purchased in the private placement, or beneficially own at least 10% of the company's common stock. BlueMountain is entitled to one director seat if it continues to own more than 50% of the private placement shares or beneficially owns at least 5% of the company's total shares.
The company is entitled to appoint no directors if the funds have sold more than 50% of the private placement stock and beneficially own less than 5% of the company's outstanding shares.
One of the BlueMountain designees, while on the board, has the right to serve on the company's risk committee. As long as the BlueMountain funds own greater than 10% of the company's outstanding shares, the vote of at least one of the designees is required for the board to approve the issuance of any common shares for consideration less than the lower of the company's current share price or $15.00 per share.
As long as BlueMountain maintains at least one board seat, the number of the board's total members cannot be more than seven without the approval of at least one BlueMountain designee.
MedEquities went public in an IPO that closed Oct. 4.