The Anatomy of a Ceasefire: ZimCal Exits Medallion Financial in $11 Million Buyout

MINNEAPOLIS, MN – October 19, 2026 — Sometimes the loudest battles in corporate governance end not with a bang, but with a carefully negotiated, mutually beneficial transaction. Such is the case today as ZimCal Asset Management LLC and its affiliate, BIMIZCI Fund LLC, announced a comprehensive settlement with Medallion Financial Corp., effectively concluding a contentious five-year investment and a bitter activist campaign.

Under the terms of the Purchase and Settlement Agreement, the specialty finance lender will repurchase $15 million in aggregate liquidation amount of trust preferred securities (TruPS) from BIMIZCI for roughly $11.05 million in cash, plus accrued distributions. In tandem, ZimCal has agreed to liquidate its remaining equity position—which peaked at over 530,000 shares—by the end of the year, while withdrawing its proxy contest materials and agreeing to a five-year standstill.

For observers of the alternative credit space, the resolution offers a fascinating case study in how distressed debt investors navigate complex capital structures, regulatory overhangs, and the rare necessity of public activism.

A Balance Sheet Win for a Transitioning Lender

To understand the mechanics of this settlement, one must look closely at the financial maneuvering it enables for Medallion Financial. By retiring $15 million of long-dated TruPS—securities originally due in 2037—for just 73.66% of their face value, the company secures an immediate, accretive gain. The nearly 26% discount represents a shrewd balance sheet optimization for a lender that has been working aggressively to reshape its financial narrative.

Medallion Financial is expected to record a gain from this repurchase in the fourth quarter of 2026. For a company that has faced intense scrutiny over its leverage and valuation metrics, retiring expensive, subordinated debt at a steep discount is a clear victory. Analysts have recently noted the company's high debt levels and an Altman Z-Score hovering in distress territory, making any deleveraging event a welcome development for equity holders and credit rating agencies alike.

The specialty finance company is no longer the business it was a decade ago. Originally built on the back of lending against New York City taxi medallions, the firm was forced into a radical pivot when the meteoric rise of ride-sharing platforms decimated medallion values. Today, Medallion has successfully diversified into consumer and commercial lending, including recreational vehicles, boats, and home improvements. Recent quarterly results reflect this successful pivot, with total assets crossing the $3.0 billion threshold for the first time and loan originations surging 63% year-over-year.

Yet, despite these operational successes, the shadow of past governance issues and the ongoing presence of an activist investor had kept the stock under pressure. By buying out ZimCal’s debt position and securing an orderly exit for its equity stake, Medallion management clears a significant distraction from its path forward.

The Roots of the Conflict: Governance and Regulatory Scrutiny

The relationship between ZimCal and Medallion was not always defined by proxy fights. BIMIZCI Fund LLC initially acquired the trust preferred securities in the secondary market in February 2021. ZimCal, founded in 2015 by Stephen Hodges, typically operates under the radar, targeting niche, illiquid, and complex credit opportunities across the capital structure. Activism is not its standard playbook.

However, the dynamic shifted dramatically in December 2021 when the Securities and Exchange Commission charged Medallion Financial and its President with engaging in fraudulent schemes to artificially inflate the company's stock price. The SEC alleged illegal touting through paid positive stories and fraudulently increasing the carrying value of Medallion Bank to mask losses in the core taxi medallion portfolio.

For ZimCal, these charges were a catalyst. Citing a critical need for accountability, executive oversight, and modernized governance, the investment firm accumulated a common stock position starting in December 2023 and launched a public proxy contest ahead of the 2024 annual meeting.

"When you are investing in stressed or special situations, you rely heavily on the integrity of the capital structure and the transparency of management," noted one credit analyst familiar with the dispute. "When the SEC steps in with fraud charges, a debt holder has to decide whether to cut their losses or fight for governance changes to protect their investment."

ZimCal chose to fight. In May 2025, Medallion's leadership consented to a final SEC judgment that included a $1 million civil penalty and mandated the retention of an Independent Compliance Consultant. But for ZimCal, the structural governance issues remained unresolved, prompting a second proxy contest in 2026.

Shifting Tides and the Proxy Advisor Catalyst

The turning point in this multi-year standoff likely occurred in the lead-up to the 2026 annual meeting. While ZimCal’s lead nominee captured 22.1% of the vote in 2024, the 2026 campaign saw a subtle but vital shift in institutional sentiment.

Influential proxy advisory firms ISS and Glass Lewis, which had previously backed Medallion's management, changed their tune. Both firms recommended that shareholders vote for two of BIMIZCI's nominees, explicitly withholding support for incumbent directors. The advisors cited a lack of independence necessary for effective oversight—a direct validation of ZimCal's core activist thesis.

Although Medallion's nominees were ultimately re-elected with approximately 78% of the vote, ZimCal's lead nominee saw support inch up to 27.1%. More importantly, the proxy advisors' defection signaled to Medallion's board that institutional patience with legacy governance structures was wearing thin.

This mounting pressure, combined with the escalating costs and public relations damage of a perpetual proxy war, created the perfect environment for a negotiated settlement. The resulting agreement contains customary standstill, mutual non-disparagement, and non-litigation provisions. ZimCal has also formally withdrawn its campaign materials, marking a definitive end to the hostilities.

The Esoteric Credit Playbook in Action

For ZimCal Asset Management, the settlement represents a successful, albeit exhausting, realization of its investment thesis. The firm managed to monetize a highly illiquid, subordinated debt instrument at a predictable price while securing a window to exit its equity position without triggering a market panic.

"We invested in Medallion because we believed the business had tremendous potential," said Stephen Hodges, Founder of ZimCal Asset Management LLC, in today's announcement. "Our recent discussions with Medallion management were constructive and productive, and we reached a mutually acceptable resolution that we believe serves the interests of all stockholders and allows both parties to move forward. We wish the Company and its stockholders well. ZimCal’s focus now returns to the esoteric value-credit opportunities the firm has pursued since 2015."

Hodges' statement underscores the pragmatic reality of distressed credit investing. The goal is rarely to run the target company; the goal is to unlock value and protect downside risk. By forcing Medallion to address its governance shortcomings and ultimately securing a buyout of the TruPS, ZimCal demonstrated the efficacy of its active engagement strategy.

The requirement for ZimCal to dispose of its remaining shares of Medallion common stock by December 31, 2026, will be closely watched by market participants. Given Medallion's roughly 23 million shares outstanding, an orderly liquidation of this stake over the next ten weeks should be manageable, provided it is executed through measured secondary market sales or block trades.

Ultimately, the resolution between ZimCal and Medallion Financial serves as a testament to the self-correcting mechanisms of the public markets. A specialty lender burdened by historical missteps was forced to modernize its governance under pressure from an esoteric credit fund. Now, with the debt discounted, the activist appeased, and the proxy battles concluded, both entities are free to return to their respective core competencies. For Medallion, that means continuing its rapid growth in consumer lending. For ZimCal, it means hunting for the next complex, misunderstood credit opportunity hidden within the secondary markets.