The closed-ended fund is embroiled in legal fees in relation to its largest holding.
The £240m Ranger Direct Lending fund has set aside a further 4 per cent of its net asset value [NAV] to mitigate against a potential write-down from its largest holding, prompting a fall in its share price to a historic low.
The impairment relates to the Princeton Alternative Income Fund, which has exposure to the Argon Credit bankruptcy, an on-going headwind for the Ranger fund in 2017, and is Ranger’s largest portfolio position.
The cost of legal fees and potential losses relating to its holding in the Princeton fund have prompted a substantial fall in investor confidence with the portfolio on a 28.1 per cent discount to NAV. The Princeton Alternative Income Fund intends to take an additional gross reserve of approximately $10.4m against the Argon portfolio due to a decline in recent cash flows attributable to the portfolio.
Ranger Direct Lending share price over 1 year
Ranger said in a statement: “The notification by Princeton does not contain detailed financial records or portfolio information that would allow the Company to fully assess the basis on which the reserve has been taken and, as a result, it is unable to confirm the precise impact of the reserve on NAV at the current time.”
Analysts at Numis Securities say the further write-down in relation to the Princeton investment is clearly disappointing for investors.
“Ranger has already made a 3.1 per cent of NAV impairment in relation to Princeton (this was originally estimated at c.4 per cent). At 30 June, the Princeton sidepocket was $21.7m, representing c.9 per cent of net assets.”
This implies that after the latest write-down the residual exposure to Princeton assets will be nearly 5 per cent of net assets.
“We expect the continued uncertainty over the potential exposure and lack of flow of information from Princeton to continue to weigh on the share price.”
The company was also forced to cut its dividend reflecting legal fees as well as lower expected returns from a portion of the SME loans.