The closed-ended investment trust has seen a testing 2017 with legal fees and cash drag weigh on Ranger Direct Lending.
The £240m Ranger Direct Lending fund was announced its latest dividend of 24.26 pence per ordinary share for the 3-month period to 30 June 2017, its lowest in more than a year.
In 2017 the fund has been hurt by a problem related to its largest holding. In the closing weeks of 2016 it was revealed that a direct lending platform in the US called Argon Credit was collapsing. The Ranger Direct Lending portfolio, which is listed on the London Stock Exchange, had $28m of indirect exposure to Argon through the Princeton Alternative Income fund (who lent money to the platform).
This has meant a bumpy ride for investors in 2017 after a stellar run in 2016 where the portfolio outperformed nearly all its rivals as well as the broader marketplace, as shown in the graph below.
Its latest numbers show returns were again comparable to the last few months. This was due to a combination of expenses such as legal fees and higher than expected cash levels. In 2017, excluding the estimated dividend mentioned above, a total of 55.44 pence per share has been paid in dividends to ordinary shareholders. In 2016, a total of 89.61 pence per share was paid in dividends to ordinary shareholders.
There has also been an increase in cash holdings, which has caused a 3 – 4 bps increase in cash drag over 2016 levels, Ranger says. In June the loss-provision also had a slight increase of 5 bps over the previous month due to an increase in the loss reserve for a consumer lending latform and an SME platform.
Ranger Direct Lending invests in a variety of debt instruments from multiple direct lending platforms within a diverse group of asset classes, including real estate loans, SME loans. It anticipates investable deployment levels normalising over the next few months. Additionally, the company expects the loss reserve to continue at this level for the next few months.
The firm said in a letter to shareholders: “Based on the anticipated loss rate and expenses, plus the Company announcement that it will not seek any additional leverage for the foreseeable future, the Company is currently targeting dividends on the issue price of between 7 – 10 per cent.”