RANGER Direct Lending (RDL) is expecting its net asset value (NAV) to be pulled down by around four per cent after its Princeton fund holding announced it was setting aside more money to cover losses in bankrupt direct lending platform Argon.
The alternative finance investment trust, which backs secured business loans mainly in the US, has an investment in Princeton giving it exposure to direct lending platform Argon Credit, which went bankrupt in December.
RDL has been in an ongoing legal dispute over Princeton’s level of exposure to Argon. The latest announcement from Ranger Direct shows Princeton intends to take an additional gross reserve of approximately $10.4m (£7.9m) against the Argon portfolio due to a decline in recent cash flows attributable to the portfolio.
“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,” RDL said in a stock market update on Tuesday.
“However, the company currently expects that the reserve will be treated as an impairment of its investment in Princeton which would result in an approximate decrease of approximately four per cent in the NAV per ordinary share calculated as at 30 September 2017.”
In April 2017, RDL said it had taken an impairment of $8.87m on its original exposure to Princeton due to a decline in cashflow from the Argon portfolio. This represented four per cent of assets.
But since then the fund has been unhappy with the information provided from Princeton and how it calculated a writedown of $11.7m on the Argon portfolio, opening the doors to arbitration proceedings, which are due to start on November 20.
“A 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,” Numis said in an analyst note.
“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 costs in relation to the arbitration with Princeton as well as lower expected returns from a portion of the loans and business cash advances and consumer loans portfolios.”