SEC Company Response from DEEPHAVEN CAPITAL MANAGEMENT LLC (CIK 0001140223) — Jul 14, 2005
DEEPHAVEN CAPITAL MANAGEMENT LLC (CIK 0001140223)
Date: July 14, 2005 · CIK: 0001140223 · Accession: 0000905148-05-003776
AI Filing Summary & Sentiment
Referenced dates: June 27, 2005
Letter
Re: MCI, Inc. Preliminary proxy statement filed on Schedule 14A Filed on June 15, 2005 by Deephaven Capital Management LLC File No. 1-10415
SIDLEY AUSTIN BROWN & WOOD LLP
BEIJING 787 SEVENTH AVENUE LOS ANGELES ---- NEW YORK, NEW YORK 10019 ---- BRUSSELS TELEPHONE 212 839 5300 NEW YORK ---- FACSIMILE 212 839 5599 ---- CHICAGO www.sidley.com SAN FRANCISCO ---- ---- DALLAS FOUNDED 1866 SHANGHAI ---- ---- GENEVA SINGAPORE ---- ---- HONG KONG TOKYO ---- ---- LONDON WASHINGTON, D.C.
CONFIDENTIAL ------------
July 15, 2005
VIA ELECTRONIC FILING
United States Securities and Exchange Commission 100 F Street, N.E. Washington, D.C. 20549
Attention: Division of Corporation Finance
Ladies and Gentlemen:
On behalf of our client Deephaven Capital Management LLC ("Deephaven"), transmitted herewith for filing with the Securities and Exchange Commission (the "Commission") under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is an amendment (the "Proposed Amendment") to Deephaven's preliminary proxy statement on Schedule 14A (the "Preliminary Proxy Statement"), including the annexes thereto. The Proposed Amendment is marked to indicate revisions from the Preliminary Proxy Statement as filed with the Commission on June 15, 2005.
The comments set forth below were provided by the Commission's staff (the "Staff") to us as special counsel to Deephaven by letter dated June 27, 2005 (the "Comments"). We have provided the Staff's Comments to representatives of Deephaven and have set forth Deephaven's responses below. Unless otherwise indicated, all page references in the Comments are to the Preliminary Proxy Statement and all page references in the responses to the Comments
SIDLEY AUSTIN BROWN & WOOD LLP IS A DELAWARE LIMITED LIABILITY PARTNERSHIP PRACTICING IN AFFILIATION WITH OTHER SIDLEY AUSTIN BROWN & WOOD PARTNERSHIPS
<PAGE>
Securities and Exchange Commission Attention: Division of Corporation Finance July 15, 2005 Page 2
are to the Proposed Amendment. Unless otherwise indicated, defined terms used herein have the meanings set forth in the Proposed Amendment.
General -------
1. SEC Comment: We note in a June 15, 2005 Dow Jones News Wires article entitled "MCI Holder's Bid to Stop Verizon Deal May Draw Qwest" that Deephaven's portfolio manager, Matthew Halbower, stated that "[i]n a very short period of time, I'll expect to have the proxy for 50% or more of MCI shareholders." Mr. Halbower's statement may implicate Note (d) of Rule 14a-9, which prohibits claims made prior to a meeting regarding results of a solicitation. Please avoid such statements in future communications relating to this solicitation.
Response: Deephaven acknowledges the Staff's comment.
Proxy Statement ---------------
2. SEC Comment: We reference an article dated June 15, 2005 in the New York Times entitled "A Campaign to Derail Verizon-MCI bid" that quoted "a person with knowledge of the decision-making inside Qwest" said that Qwest "would closely watch Deephaven's efforts." In the same article, Deephaven's portfolio manager said that "[i]f Qwest doesn't come back by a week before the Verizon vote, Deephaven is going to lose spectacularly. But if Qwest does come back, Deephaven strongly believes it would be successful." While we note your disclosure on page 3 that "Deephaven has no knowledge of Qwest's plans or intentions...," the statements cited above might suggest that Deephaven and Qwest have at least engaged in discussions about MCI. Please tell us what communications, if any, Deephaven has had with Qwest about MCI and the nature of any of these communications. Also advise us whether Deephaven was one of the MCI shareholders that provided equity funding to Qwest in connection with its offer to acquire MCI in April of 2005. Furthermore, prominently disclose in the forepart of your document all affiliations, both past and present, between Deephaven and Qwest.
Response: In response to the Staff's comment, Deephaven has caused a separate letter to be delivered to the Commission.
3. SEC Comment: We note your indication on the cover page of the proxy statement and proxy that they are "subject to completion," however, please revise to indicate that the proxy statement and card are preliminary copies. Refer to Rule 14a-6(e)(1).
Response: In response to the Staff's comment, Deephaven has revised the disclosure in the Proposed Amendment to state "Preliminary Copy" on page (i) of the Proposed Amendment, Annex A, Annex B and the proxy card.
4. SEC Comment: We note that the company has not yet set the record date for voting at the special meeting.
<PAGE>
Securities and Exchange Commission Attention: Division of Corporation Finance July 15, 2005 Page 3
a. SEC Comment: Disclose whether you intend to send out your proxy materials prior to the determination of the record date.
Response: Deephaven currently intends to send out its proxy materials once the record date has been announced by MCI. In response to the Staff's comment, Deephaven has revised the disclosure on page (i) of the Proposed Amendment.
b. SEC Comment: If proxy cards are sent out prior to notification of the record date, advise us as to what steps will be taken to ensure that votes will be counted only for shareholders as of the official record date.
Response: See the response to Comment 4(a) above.
Background of the Decision to Oppose the Proposed Merger, page 1 ----------------------------------------------------------------
5. SEC Comment: Disclose the basis for Deephaven's belief that "the proposed merger between Verizon and MCI is not in the best interests of MCI stockholders."
Response: In response to the Staff's comment, Deephaven has revised the disclosure on page 1 of the Proposed Amendment.
a. SEC Comment: Also clarify what you mean by "Deephaven's commitment to stockholder value."
Response: In response to the Staff's comment, Deephaven has revised the disclosure on page 1 of the Proposed Amendment.
b. SEC Comment: In this regard, qualify the reference to "stockholder value" to prominently state that Deephaven may have interests that differ from holders of MCI common stock, including disclosure that Deephaven holds a short position in Verizon shares, a long position in Qwest shares, holds bonds of both Qwest and MCI, and has positions held under swap agreements.
Response: In response to the Staff's comment, Deephaven has revised the disclosure in footnote 1 on page 1 of the Proposed Amendment. See the response to Comment 5(c) for further discussion.
c. SEC Comment: Describe the nature of these interests and how the interests may differ from holders of MCI common stock.
Response: As discussed during our phone conversation with Albert Pappas at the Division of Corporation Finance, Deephaven believes that it has already adequately disclosed those items required by Item 5(a) of Regulation 14A promulgated under the Exchange Act. To the extent there is any benefit or detriment to the holders of MCI common stock, Deephaven would benefit or be
<PAGE>
Securities and Exchange Commission Attention: Division of Corporation Finance July 15, 2005 Page 4
harmed ratably with other MCI stockholders. See the response to Comment 13 for further discussion.
6. SEC Comment: We note that MCI could remain as a stand-alone company if the Verizon transaction is not approved by MCI shareholders.
a. SEC Comment: Clarify how such a result supports Deephaven's "commitment to stockholder value."
Response: In response to the Staff's comment, Deephaven has revised the disclosure on page 1 of the Proposed Amendment.
b. SEC Comment: In doing so, please describe the consequences of remaining a stand-alone company and the effects of terminating the merger agreement with Verizon, including any termination fees.
Response: In response to the Staff's comment, Deephaven has added the section titled "Consequences of the MCI-Verizon Merger Not Being Completed" on pages 9-11 of the Proposed Amendment.
Reasons to Vote Against the Proposed Merger -------------------------------------------
7. SEC Comment: We note your disclosure that "[t]he following excerpts . . . provide a summary of events and discussions leading to MCI's acceptance of Verizon's offer." We believe that your selection of quotations from the preliminary Verizon proxy statement/prospectus does not provide a reasonable summary of the process that led to MCI's acceptance of the Verizon offer. For example, the disclosure of only Verizon's April 29th offer and a brief quote regarding the MCI board's acceptance of this offer only relates to price information and does not provide an adequate description of the MCI board's determination to accept the Verizon offer. Your disclosure should provide appropriate factual context required by investors to interpret the statements in your soliciting materials. To aid investor understanding, we suggest that you add additional descriptive text to place the statements you quote in appropriate context. Please revise to provide a more complete and balanced summary of the events and discussions that led to MCI's acceptance of the Verizon offer.
Response: In response to the Staff's comment, Deephaven has revised the disclosure on pages 1-7 of the Proposed Amendment.
8. SEC Comment: We remind you that referring to another person's statements does not insulate you from the applicability of Rule 14a-9. In this regard, you should avoid issuing statements in your soliciting materials that directly or indirectly impugn the character, integrity or personal reputation or make charges of illegal, improper or immoral conduct without factual foundation. For example, provide reasonable, factual
<PAGE>
Securities and Exchange Commission Attention: Division of Corporation Finance July 15, 2005 Page 5
support for or refrain from including on page 2 the statement from the Qwest press release that "[w]e believe that the decision of the MCI board to once again favor Verizon is another example of the board's failure to accept the offer to maximize shareowner value." This disclosure may imply that the MCI board has breached its fiduciary duties by accepting the Verizon offer. Please revise.
Response: In response to the Staff's comment, Deephaven has revised the disclosure on page 7 of the Proposed Amendment.
9. SEC Comment: We note your disclosure that "Deephaven believes a combination with Qwest under the terms and conditions of Qwest's revoked proposal . . . would be in the interest of MCI stockholders" and your disclosure that "there can be no assurance that Qwest will make another bid for MCI." Because, as you state, Qwest has revoked its April 21st offer,
a. SEC Comment: [P]lease clarify that the decision MCI shareholders currently face is between a merger with Verizon and remaining as a stand-alone company.
Response: In response to the Staff's comment, Deephaven has revised the disclosure on page 7 of the Proposed Amendment.
b. SEC Comment: Also, please disclose that even if Qwest were to make another bid for MCI, there is no assurance as to what terms Qwest would propose, nor is there any assurance that MCI's board would accept any of the terms.
Response: In response to the Staff's comment, Deephaven has revised the disclosure on page 7 of the Proposed Amendment.
c. SEC Comment: Also comply with this comment in future communications, written or oral, relating to this solicitation.
Response: Deephaven acknowledges the Staff's comment.
Proxy Solicitation and Expenses, page 11 ----------------------------------------
10. SEC Comment: We note that "[p]roxies may be solicited by mail, telephone, telefax, the Internet, newspapers and other publications of general distribution and in person." Please be advised that all written soliciting materials, including e-mail correspondence, and information posted on websites and any scripts to be used in soliciting proxies over the telephone, must be filed under the cover of Schedule 14A. Refer to Rule 14a-6(b) and (c). In your response letter, tell us the specific means by which you will solicit via the Internet, such as e-mail, websites, chat rooms, etc. and provide your analysis regarding the validity under applicable state law of using this method of electronic submission.
<PAGE>
Securities and Exchange Commission Attention: Division of Corporation Finance July 15, 2005 Page 6
Response: While Deephaven believes that the validity of an Internet solicitation is well-established, Deephaven has determined not to solicit proxies electronically. In response to the Staff's comment, Deephaven has revised the disclosure on pages 14 and 18 of the Proposed Amendment.
Information About the Participants in this Solicitation of Proxies, page 12 ---------------------------------------------------------------------------
11. SEC Comment: We note your disclosure that "[c]ertain other individuals identified in Annex A to this proxy statement may also be deemed to be participants . . . ," however, we are unable to locate any disclosure of additional persons that may be participants other than the reference to Deephaven and its proxy solicitor in Annex A. Please revise or advise.
Response: In response to the Staff's comment, Deephaven has revised the disclosure on page 19 of the Proposed Amendment to clarify that there are no other participants, as defined in Item 4 of Schedule 14A, other than Deephaven, in connection with this proxy solicitation.
a. SEC Comment: Further, please revise your participant discussion to disclose who is the natural person that controls Deephaven.
Response: In response to the Staff's comment, Deephaven has revised the disclosure on page A-1 of the Proposed Amendment. Other than its CEO and Management Committee, no natural person controls Deephaven. Deephaven is
Show Raw Text
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.txt
<TEXT>
SIDLEY AUSTIN BROWN & WOOD LLP
BEIJING 787 SEVENTH AVENUE LOS ANGELES
---- NEW YORK, NEW YORK 10019 ----
BRUSSELS TELEPHONE 212 839 5300 NEW YORK
---- FACSIMILE 212 839 5599 ----
CHICAGO www.sidley.com SAN FRANCISCO
---- ----
DALLAS FOUNDED 1866 SHANGHAI
---- ----
GENEVA SINGAPORE
---- ----
HONG KONG TOKYO
---- ----
LONDON WASHINGTON, D.C.
CONFIDENTIAL
------------
July 15, 2005
VIA ELECTRONIC FILING
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attention: Division of Corporation Finance
Re: MCI, Inc.
Preliminary proxy statement filed on Schedule 14A
Filed on June 15, 2005 by Deephaven Capital Management LLC
File No. 1-10415
Ladies and Gentlemen:
On behalf of our client Deephaven Capital Management LLC
("Deephaven"), transmitted herewith for filing with the Securities and
Exchange Commission (the "Commission") under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), is an amendment (the "Proposed
Amendment") to Deephaven's preliminary proxy statement on Schedule 14A (the
"Preliminary Proxy Statement"), including the annexes thereto. The Proposed
Amendment is marked to indicate revisions from the Preliminary Proxy Statement
as filed with the Commission on June 15, 2005.
The comments set forth below were provided by the Commission's staff
(the "Staff") to us as special counsel to Deephaven by letter dated June 27,
2005 (the "Comments"). We have provided the Staff's Comments to
representatives of Deephaven and have set forth Deephaven's responses below.
Unless otherwise indicated, all page references in the Comments are to the
Preliminary Proxy Statement and all page references in the responses to the
Comments
SIDLEY AUSTIN BROWN & WOOD LLP IS A DELAWARE LIMITED LIABILITY PARTNERSHIP
PRACTICING IN AFFILIATION WITH OTHER SIDLEY AUSTIN BROWN & WOOD PARTNERSHIPS
<PAGE>
Securities and Exchange Commission
Attention: Division of Corporation Finance
July 15, 2005
Page 2
are to the Proposed Amendment. Unless otherwise indicated, defined terms used
herein have the meanings set forth in the Proposed Amendment.
General
-------
1. SEC Comment: We note in a June 15, 2005 Dow Jones News Wires article
entitled "MCI Holder's Bid to Stop Verizon Deal May Draw Qwest" that
Deephaven's portfolio manager, Matthew Halbower, stated that "[i]n a very
short period of time, I'll expect to have the proxy for 50% or more of
MCI shareholders." Mr. Halbower's statement may implicate Note (d) of
Rule 14a-9, which prohibits claims made prior to a meeting regarding
results of a solicitation. Please avoid such statements in future
communications relating to this solicitation.
Response: Deephaven acknowledges the Staff's comment.
Proxy Statement
---------------
2. SEC Comment: We reference an article dated June 15, 2005 in the New York
Times entitled "A Campaign to Derail Verizon-MCI bid" that quoted "a
person with knowledge of the decision-making inside Qwest" said that
Qwest "would closely watch Deephaven's efforts." In the same article,
Deephaven's portfolio manager said that "[i]f Qwest doesn't come back by
a week before the Verizon vote, Deephaven is going to lose spectacularly.
But if Qwest does come back, Deephaven strongly believes it would be
successful." While we note your disclosure on page 3 that "Deephaven has
no knowledge of Qwest's plans or intentions...," the statements cited
above might suggest that Deephaven and Qwest have at least engaged in
discussions about MCI. Please tell us what communications, if any,
Deephaven has had with Qwest about MCI and the nature of any of these
communications. Also advise us whether Deephaven was one of the MCI
shareholders that provided equity funding to Qwest in connection with its
offer to acquire MCI in April of 2005. Furthermore, prominently disclose
in the forepart of your document all affiliations, both past and present,
between Deephaven and Qwest.
Response: In response to the Staff's comment, Deephaven has caused a
separate letter to be delivered to the Commission.
3. SEC Comment: We note your indication on the cover page of the proxy
statement and proxy that they are "subject to completion," however,
please revise to indicate that the proxy statement and card are
preliminary copies. Refer to Rule 14a-6(e)(1).
Response: In response to the Staff's comment, Deephaven has revised
the disclosure in the Proposed Amendment to state "Preliminary Copy"
on page (i) of the Proposed Amendment, Annex A, Annex B and the
proxy card.
4. SEC Comment: We note that the company has not yet set the record date for
voting at the special meeting.
<PAGE>
Securities and Exchange Commission
Attention: Division of Corporation Finance
July 15, 2005
Page 3
a. SEC Comment: Disclose whether you intend to send out your proxy
materials prior to the determination of the record date.
Response: Deephaven currently intends to send out its proxy
materials once the record date has been announced by MCI. In
response to the Staff's comment, Deephaven has revised the
disclosure on page (i) of the Proposed Amendment.
b. SEC Comment: If proxy cards are sent out prior to notification of
the record date, advise us as to what steps will be taken to ensure
that votes will be counted only for shareholders as of the official
record date.
Response: See the response to Comment 4(a) above.
Background of the Decision to Oppose the Proposed Merger, page 1
----------------------------------------------------------------
5. SEC Comment: Disclose the basis for Deephaven's belief that "the proposed
merger between Verizon and MCI is not in the best interests of MCI
stockholders."
Response: In response to the Staff's comment, Deephaven has revised
the disclosure on page 1 of the Proposed Amendment.
a. SEC Comment: Also clarify what you mean by "Deephaven's commitment
to stockholder value."
Response: In response to the Staff's comment, Deephaven has revised
the disclosure on page 1 of the Proposed Amendment.
b. SEC Comment: In this regard, qualify the reference to "stockholder
value" to prominently state that Deephaven may have interests that
differ from holders of MCI common stock, including disclosure that
Deephaven holds a short position in Verizon shares, a long position
in Qwest shares, holds bonds of both Qwest and MCI, and has
positions held under swap agreements.
Response: In response to the Staff's comment, Deephaven has revised
the disclosure in footnote 1 on page 1 of the Proposed Amendment.
See the response to Comment 5(c) for further discussion.
c. SEC Comment: Describe the nature of these interests and how the
interests may differ from holders of MCI common stock.
Response: As discussed during our phone conversation with Albert
Pappas at the Division of Corporation Finance, Deephaven believes
that it has already adequately disclosed those items required by
Item 5(a) of Regulation 14A promulgated under the Exchange Act. To
the extent there is any benefit or detriment to the holders of MCI
common stock, Deephaven would benefit or be
<PAGE>
Securities and Exchange Commission
Attention: Division of Corporation Finance
July 15, 2005
Page 4
harmed ratably with other MCI stockholders. See the response to
Comment 13 for further discussion.
6. SEC Comment: We note that MCI could remain as a stand-alone company if
the Verizon transaction is not approved by MCI shareholders.
a. SEC Comment: Clarify how such a result supports Deephaven's
"commitment to stockholder value."
Response: In response to the Staff's comment, Deephaven has revised
the disclosure on page 1 of the Proposed Amendment.
b. SEC Comment: In doing so, please describe the consequences of
remaining a stand-alone company and the effects of terminating the
merger agreement with Verizon, including any termination fees.
Response: In response to the Staff's comment, Deephaven has added
the section titled "Consequences of the MCI-Verizon Merger Not Being
Completed" on pages 9-11 of the Proposed Amendment.
Reasons to Vote Against the Proposed Merger
-------------------------------------------
7. SEC Comment: We note your disclosure that "[t]he following excerpts . . .
provide a summary of events and discussions leading to MCI's acceptance
of Verizon's offer." We believe that your selection of quotations from
the preliminary Verizon proxy statement/prospectus does not provide a
reasonable summary of the process that led to MCI's acceptance of the
Verizon offer. For example, the disclosure of only Verizon's April 29th
offer and a brief quote regarding the MCI board's acceptance of this
offer only relates to price information and does not provide an adequate
description of the MCI board's determination to accept the Verizon offer.
Your disclosure should provide appropriate factual context required by
investors to interpret the statements in your soliciting materials. To
aid investor understanding, we suggest that you add additional
descriptive text to place the statements you quote in appropriate
context. Please revise to provide a more complete and balanced summary of
the events and discussions that led to MCI's acceptance of the Verizon
offer.
Response: In response to the Staff's comment, Deephaven has revised
the disclosure on pages 1-7 of the Proposed Amendment.
8. SEC Comment: We remind you that referring to another person's statements
does not insulate you from the applicability of Rule 14a-9. In this
regard, you should avoid issuing statements in your soliciting materials
that directly or indirectly impugn the character, integrity or personal
reputation or make charges of illegal, improper or immoral conduct
without factual foundation. For example, provide reasonable, factual
<PAGE>
Securities and Exchange Commission
Attention: Division of Corporation Finance
July 15, 2005
Page 5
support for or refrain from including on page 2 the statement from the
Qwest press release that "[w]e believe that the decision of the MCI board
to once again favor Verizon is another example of the board's failure to
accept the offer to maximize shareowner value." This disclosure may imply
that the MCI board has breached its fiduciary duties by accepting the
Verizon offer. Please revise.
Response: In response to the Staff's comment, Deephaven has revised
the disclosure on page 7 of the Proposed Amendment.
9. SEC Comment: We note your disclosure that "Deephaven believes a
combination with Qwest under the terms and conditions of Qwest's revoked
proposal . . . would be in the interest of MCI stockholders" and your
disclosure that "there can be no assurance that Qwest will make another
bid for MCI." Because, as you state, Qwest has revoked its April 21st
offer,
a. SEC Comment: [P]lease clarify that the decision MCI shareholders
currently face is between a merger with Verizon and remaining as a
stand-alone company.
Response: In response to the Staff's comment, Deephaven has revised
the disclosure on page 7 of the Proposed Amendment.
b. SEC Comment: Also, please disclose that even if Qwest were to make
another bid for MCI, there is no assurance as to what terms Qwest
would propose, nor is there any assurance that MCI's board would
accept any of the terms.
Response: In response to the Staff's comment, Deephaven has revised
the disclosure on page 7 of the Proposed Amendment.
c. SEC Comment: Also comply with this comment in future communications,
written or oral, relating to this solicitation.
Response: Deephaven acknowledges the Staff's comment.
Proxy Solicitation and Expenses, page 11
----------------------------------------
10. SEC Comment: We note that "[p]roxies may be solicited by mail, telephone,
telefax, the Internet, newspapers and other publications of general
distribution and in person." Please be advised that all written
soliciting materials, including e-mail correspondence, and information
posted on websites and any scripts to be used in soliciting proxies over
the telephone, must be filed under the cover of Schedule 14A. Refer to
Rule 14a-6(b) and (c). In your response letter, tell us the specific
means by which you will solicit via the Internet, such as e-mail,
websites, chat rooms, etc. and provide your analysis regarding the
validity under applicable state law of using this method of electronic
submission.
<PAGE>
Securities and Exchange Commission
Attention: Division of Corporation Finance
July 15, 2005
Page 6
Response: While Deephaven believes that the validity of an Internet
solicitation is well-established, Deephaven has determined not to
solicit proxies electronically. In response to the Staff's comment,
Deephaven has revised the disclosure on pages 14 and 18 of the
Proposed Amendment.
Information About the Participants in this Solicitation of Proxies, page 12
---------------------------------------------------------------------------
11. SEC Comment: We note your disclosure that "[c]ertain other individuals
identified in Annex A to this proxy statement may also be deemed to be
participants . . . ," however, we are unable to locate any disclosure of
additional persons that may be participants other than the reference to
Deephaven and its proxy solicitor in Annex A. Please revise or advise.
Response: In response to the Staff's comment, Deephaven has revised
the disclosure on page 19 of the Proposed Amendment to clarify that
there are no other participants, as defined in Item 4 of Schedule
14A, other than Deephaven, in connection with this proxy
solicitation.
a. SEC Comment: Further, please revise your participant discussion to
disclose who is the natural person that controls Deephaven.
Response: In response to the Staff's comment, Deephaven has revised
the disclosure on page A-1 of the Proposed Amendment. Other than its
CEO and Management Committee, no natural person controls Deephaven.
Deephaven is