Preston Hollow's push to publicize confidential Nuveen tapes puts banks in spotlight

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Preston Hollow Capital LLC is seeking to lift the veil on tape recordings and transcripts collected from subpoenaed banks in the private lender’s lawsuit that accuses Nuveen of strong-arm tactics to protect its high-yield market share.

Dallas-based Preston Hollow filed a motion May 21 asking the Delaware Chancery Court to make confidential tape recordings and transcripts available to the public, according to the docket in case number 2019-0169-SG being presided over by Vice Chancellor Sam Glasscock III.

The filings in support of the motion are confidential and so are not public, but Preston Hollow has argued in previous filings that the evidence it’s gathered from subpoenas to date supports its arguments.

Many filings, including the subpoenaed information, are listed as confidential and so are protected from public scrutiny. Many other documents made public are heavily redacted, concealing the names of individuals and firms in some cases.

While the lawsuit’s filing earlier this year opened a window into the high stakes, behind-the-scenes dealings in the high-yield market between Nuveen and banks and broker-dealers, opening the recordings and transcripts to the public would dramatically expand that view.

The confidentiality issue is among the latest developments in the case that also includes new subpoena filings and the posting of public versions of letters submitted to Glasscock ahead of his May 14 ruling on Nuveen’s motion to dismiss. In its letter, Preston Hollow cites information gathered from subpoenas that alleges Nuveen was trying to “stamp out” its business model.

Preston Hollow, a non-bank direct lender that provides up to 100% placements of debt, sued Nuveen on Feb. 28. It accused the firm and its head of municipals, John Miller, of a concerted effort to damage Preston Hollow’s business through “threatening, anti-competitive and defamatory communications” to top broker-dealers and Preston Hollow’s primary lender. Firms were warned to steer clear of Preston Hollow or risk losing Nuveen’s business.

Chicago-based Nuveen fired back in its motion to dismiss, arguing there’s nothing illegal about the tactics it was accused of using.

Glasscock concluded that two of four claims — one on tortious interference with prospective business relations and the other on a violation of New York’s Donnelly Antitrust Act — can move forward.

He asked for an additional briefing before deciding on whether to allow the defamation claim to proceed. He dismissed the claim of tortious interference with a contract. The information came from a report published by Law360.

"Today’s ruling was based on the allegations in the complaint, and not on the evaluation of any evidence. We continue to believe the claims are without merit and will vigorously defend ourselves,” Nuveen said in a statement to The Bond Buyer. Preston Hollow did not respond to a request for a comment.

The case being heard in the Delaware Chancery Court is in the discovery process ahead of a trial set for July 29 and 30.


Preston Hollow hopes to build its case from information drawn from subpoenas served on The Bank of America Corp., Deutsche Bank Americas Holding Corp., The Goldman Sachs Group Inc., Morgan Stanley & Co. and JPMorgan Chase & Co. They seek communications between bank employees and Nuveen representatives related to Preston Hollow.

In addition to communications with Nuveen involving Preston Hollow, the Deutsche Bank subpoena seeks “all documents and communications” between the bank and Nuveen relating to changes or revisions to the bank’s tender option bonds and/or funding arrangements with Nuveen. Preston Hollow believes the tender option program was used as a means to influence broker-dealers.

Mesirow Financial Inc. is the latest investment bank dragged into the case and its faces dueling subpoenas. Preston Hollow on May 16 filed notice of its subpoena. It broadly seeks communications related to Nuveen.

Nuveen shot back by serving its own more detailed subpoena on May 21 that drags a former Mesirow employee who now works for Preston Hollow into the case.

It seeks all information from the firm related to Preston Hollow, Nuveen or Miller, including recordings of telephone conversations with Preston Hollow as well as documents referring to communications with Preston Hollow relating to Nuveen or Miller.

It gets more specific in seeking all documents and communications from January 2017 to the present on decisions to engage or not engage in any deal or other business activity with Preston Hollow and decisions from January 1, 2017 to the present on the firm’s decision to participate or not participate in 100% placement deals with any party other than Preston Hollow.

It also seeks any communications between the firm and Preston Hollow on the Assembly Square Improvement District Assessment Bonds 2017 issue.

The subpoena also demands all documents and communications throughout 2016 relating to the departure of an employee in its high-yield municipal trading and credit group who is now with Preston Hollow. It additionally seeks all documents and communications relating to the employee and Miller or Nuveen including any internal or external communications.

It also seeks documents on total revenues received by Mesirow from all investors from 2017 to 2018 in municipal bonds, including Nuveen and other top fund management firms and communications regarding “Hutto, Texas” and any related to the Harlingen Texas Convention Center Hotel Project.

Mesirow did not respond immediate to a request for a comment on the subpoenas.

Nuveen attorneys also served the city of Rowlett, Texas with a subpoena May 22, according to court filings. FMS Bonds Inc. was served May 13 with a subpoena by Preston Hollow.


Newly released public versions of confidential letters filed ahead of the court’s May 14 ruling on the motion to dismiss also shed further light on the case Preston Hollow is building and its antitrust arguments.

Preston Hollow wrote to the judge that through one of the previously issued subpoenas it received on May 8 recorded evidence “demonstrating that Nuveen was organizing an industry-wide boycott of PHC in terms of both underwriting and financing 100% placements — through both threats and specific defamatory statements about PHC’s business practices — designed not to compete with PHC but to stamp out PHC’s business model.”

Preston Hollow submitted the letter as it was attempting to survive the motion to dismiss and asked that if the court intended to grant the motion that it do so without prejudice which would allow the firm to amend its complaint to include the newly gathered information.

“The recordings eliminate any arguable lack of specific factual support and constitute good cause to allow PHC to amend the complaint. With respect to the Donnelly Act, the recordings show that Nuveen was using its market power to organize an industry-wide boycott of PHC,” the PH letter read.

Preston Hollow submitted the letter on May 10 and a redacted version became public May 17.

Nuveen fired back in a May 13 letter to the court that became public May 20 arguing that the tapes only prove its defense.

“Plaintiff claims Nuveen’s privilege to compete argument now fails because the recordings show that Nuveen wanted to stamp out PHC’s business model’ or choke off PHC’s liquidity. As an initial matter, the tapes show that this controversy was spawned not by Nuveen, but by PHC’s effort to deprive Nuveen of deal opportunities,” the Nuveen letter read.

“The transcripts show Nuveen acted to protect itself. The recordings also reveal that Nuveen acted for other legitimate interests, like protecting against PHC’s derogatory statements about Nuveen to issuers, including that and minimizing the counterparty risk Nuveen faces when broker-dealers work with PHC,” it continued.

The suit names Nuveen LLC, Nuveen Investments Inc., Nuveen Securities LLC, and Nuveen Asset Management LLC as defendants. Market participants are watching the litigation because it raises issues of price fairness, investment competition, broker-dealer complicity, and clout. It also puts the reputations of both firms on the line.

The case pits a Dallas-based lender, which describes itself as a well-capitalized, non-bank finance company specializing in high-yield municipal specialty finance with more $1.8 billion in assets and $1.3 billion in equity capital, against a firm that is a top high-yield manager with $930 billion of assets under management including $154 billion in municipals.

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