Jefferies Talks 3 Big Reveals From MDC Partners Management

Besides Settlement, 3 Takeaways

Enumerating the takeaways, analyst John Janedis said:

1. The company cleared the air around the hiring of Liontree Advisors, stating that it is neither looking to sell nor issue equity, but could sell certain non-core assets in a bid to de-lever faster.
2. Suspension of dividend to aid in faster de-levering.
3. Exploration of other ways to de-lever rather than just through EBITDA growth.

The Settlement

In announcing the settlement, the company admitted to no liability and indicated that it is not restating any financial statements, although it would be paying $1.5 million in civil penalty, the firm noted.

The SEC probe is based on three counts:

1. Improper expenses related to the CEO.
2. Insider trading in shares by an outsider.
3. Accounting issues related to its goodwill.

Outcomes

Since then, the company has terminated CEO Miles Nadal, with Nadal repaying the company $11.3 million for improper expenses and $10.6 million in previous cash bonus.

Jefferies said the announcement removes a significant overhang at a reasonable cost. That said, the firm lowered its 2016 and 2017 earnings per share estimate, while retaining most other estimates.

The firm has a Hold rating on the shares of the company, while it upped its price target to $4 from $3.50.

At the time of writing, shares of MDC Partners were rallying 12.66 percent at $4.45.