Ranger board backtracks and opts for wind down

LIM Advisors continues to call for the chairman's resignation.

After pressure from shareholders, the board of London-listed fund Ranger Direct Lending has today announced plans to wind down the fund.

As reported on AltFi, the board of lending fund Ranger has been under pressure from outside shareholders such as LIM and Oaktree to wind down the fund – together these two investors account for nearly 30 per cent of the fund’s shareholder base.

Until this week, the board has been following an alternative course, based on a strategic review which involved getting rid of the original Texas-based management team and replacing them with well established private equity based mid-market lending specialists Ares. But today brought news that Ares has in fact notified the board that it did not wish to take up the appointment as manager. As a result, the Board has concluded that in the interests of protecting shareholder value the company should “move to realise its assets in an orderly manner”.  This course of action has been suggested by both LIM and Oaktree in numerous letters to the board.

Slightly oddly the Board also announced that it still recommends voting against Oaktree and LIM’s resolutions at the AGM on 19 June even though they are asking for a wind up as well. It was also disclosed that the Board continues to believe that “a majority of shareholders are supportive of the merits of the Ares proposition”.

The Board also highlighted that it has engaged with 14 shareholders representing 86.37 per cent of Ordinary share capital, as well as ZDP shareholders who have also requested a meeting, including a wall-crossing of certain shareholders regarding the draft circular. The Board continues to believe that “a majority of shareholders are supportive of the merits of the Ares proposition”.

Most observers reckon that the wind-up process will take a substantial amount of time, not least because the separate zero dividend holders have been arguing for a new settlement of their claims against the fund. Investment trust researchers at Numis reckon that “at 31 December 2017, $247.0m of Ranger’s assets were considered “current” in status and had an average remaining term of 14 months, the $3.7m of “late” loans had an average term of 19 months”.

The shares currently trade at a 19 per cent discount to NAV but this falls into single digits if the troubled Princeton Alternatives position was valued closer to zero. The Princeton position is valued at $29.3m at 31 March, which represents around 13.8 per cent of net assets.

Analysts at Numis report that Ranger is currently pursuing an arbitration to obtain information about Princeton (which is currently very limited) and enforce its ability to redeem, with a result expected in June/July. Princeton entered bankruptcy itself in March 2018 and Ranger is pursuing its claims in bankruptcy court. The Board intends to continue to pursue these claims to a conclusion, which is likely to continue to incur additional costs for the fund. Numis reckons that any future return of capital would have to consider the costs required to continue this case. Dealing with the zero investors might also result in a charge against assets. 

Reacting to the announcement today, Nick Paris, manager at LIM told AltFi: "We at LIM are of course delighted but we do wonder why the chairman has not resigned after wasting all this time and shareholder money during the strategic review? I have to say that we have our doubts about the chairman and are carrying on with our campaign to change the board. "