Nuveen moves to introduce new evidence in its defense against anti-competitive allegations


Two months after final trial arguments, Nuveen Investments is asking the Delaware Chancery Court to add new evidence to the trial record it claims throws cold water on Preston Hollow Capital LLC’s anti-competitive accusations.

Nuveen’s request to reopen and supplement the trial record comes as the firms and the market are awaiting a decision from Chancery Court Vice Chancellor Sam Glasscock III on the Dallas-based private lender’s allegations that the Chicago-based investment powerhouse illegally engaged in anti-competitive tactics to choke off PHC’s access to capital and deals.

Nuveen contends it acted within its rights to protect its business in the competitive high-yield market and accused PHC of engaging in predatory practices by overcharging borrowers that could secure lower rates in the open market and harming the market with weak covenants. PHC filed the lawsuit in February.

The new filing provides a fresh affidavit submitted to the court Nov. 13 from Nuveen expert witness Edward A. Snyder, a Yale School of Management professor and anti-trust, who reviewed PHC’s recent resale of a portion of the $200 million issue it had directly purchased from Chicago-based Roosevelt University. The 2018 deal was one of two deals described by Snyder as “central to the litigation” and the anti-trust claims.

Delaware Chancery Court Vice Chancellor Sam Glasscock III, seated to the far right, is presiding over the Preston Hollow Capital/Nuveen case.

“Preston Hollow earned large profits from the resale of a portion of the Roosevelt University bonds, which confirms the accuracy of my prior benchmark analysis that established that Preston Hollow’s involvement in the two at-issue bond issuances did not benefit the issuers,” Snyder wrote. “My benchmark analysis presented in the Snyder Report indicated that the Preston Hollow effect was adverse for the two issuers: they took on debt at yields that were higher than the yields of comparable issuances.”

Snyder argued his analysis shows “municipal bond issuers would be no worse off and potentially better off without Preston Hollow’s services” as he argued in his original testimony.

The filing argues that the review and pricing is relevant to Preston Hollow’s antitrust claims because Preston Hollow asserts that municipal bond issuers benefit from its unique presence in the market and its ability to offer 100 percent placement of the debt.

“Moreover, as I testified at trial, the conclusion from my benchmarking analysis—the adverse Preston Hollow effect on issuers—is consistent with John Miller’s concerns about predatory practices by Preston Hollow and harm to the industry,” Snyder continued referring to Nuveen’s head of municipals who was recorded on calls between Nuveen and banks warning them against doing business with PHC.

PHC has not yet filed a response but fired back in a statement calling Nuveen’s motion “inaccurate and without merit” and said it would oppose the request.

“PHC comprehensively established Nuveen’s wrongful conduct at trial. Nuveen’s contention that PHC’s sale of a few Roosevelt bonds for a profit 14 months after buying them justifies its behavior toward PHC in any way is absurd, particularly given the massive rally in municipals and Roosevelt’s recently-announced, transformative purchase of assets from Robert Morris University,” Greg May, a managing director in corporate development, said in an emailed statement.

“What the sale highlights is a PHC success story; Preston Hollow’s financing gave Roosevelt the ability to restructure its finances, leading to significant improvement of the Roosevelt credit during that time. Nuveen’s motion reflects desperation and speaks to the weakness of its trial defense,” May said.

Snyder’s original analysis earlier in the litigation process concluded that the Roosevelt bonds landed 100 basis points over comparable paper. Preston Hollow’s resale of bonds between October 31 and Nov. 6 “provides confirming evidence that Preston Hollow paid a substantially lower price for the Roosevelt University bonds than comparable bond issuances,” Snyder wrote in the new filing.

The bonds sold at a weighted average price of $116.2 cents on the dollar, compared to a weighted average price of $96.5 cents on the dollar paid for the bonds by Preston Hollow at issuance, which equates to a gain of approximately 20 percent in about fourteen months since the initial purchase, Snyder said.

Snyder said he looked at other factors to rule out other market influences by comparing the yield on the Roosevelt University bonds at the time of issuance and as of the first sale in the secondary market against a benchmark index of high yield municipal bonds and to quantify Preston Hollow’s gains he applied a benchmark analysis.

PHC isn’t asking for damages on claims of tortious Interference with Prospective Business Relations, and violations of the New York Donnelly Antitrust Act. Instead, it asks the court for a preliminary and permanent injunction ordering Nuveen to cease the alleged conduct and to order Nuveen to rectify the harm already caused by withdrawing and disavowing retaliatory threats. It asks that Nuveen be directed to adopt supervisory procedures to ensure ban future misconduct that is alleged.

Glasscock had been hoping for a settlement but talks proved fruitless. The judge has warned of the difficulty of enforcing an injunction or some other court-ordered remedy to halt the alleged behavior and indicated that he would allow the two to discuss how best to enforce it.

The case pits the newer and smaller non-bank finance company specializing in high-yield municipal specialty finance against an institutional powerhouse. The case originally was brought with four causes of unlawful action including Tortious Interference with Contract, Tortious Interference with Prospective Business Relations, violations of the New York Donnelly Antitrust Act, and Defamation. Glasscock has dismissed the tortious contract claim and the defamation charge.

The defamation charge was dismissed because it requires jury consideration and Chancery Court cases are decided by a judge. That charge has been transferred to the Delaware Superior Court.

When PHC filed the case in late February it cracked the window open on the cutthroat competition in the high-yield municipal market. It accusations sparked debate on the accusations of whether strong-arm tactics broke the law, broker-dealer complicity and resistance, and what constitutes pricing fairness as Nuveen labeled PHC’s yields “predatory.” The reputations of both firms remains at stake.

Preston Hollow contends its model offers issuers an affordable and flexible borrowing choice. Nuveen believes it damages the market and overcharges issuers and contends its actions seeking to protect its access to high-yield deals was legal.

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