Ranger Direct Lending’s (RDL) ongoing arbitration with the Princeton Alternative Income Fund has hit a new snag.
Princeton filed for bankruptcy last week, hours before its arbitration hearing with RDL over its exposure to bankrupt lender Argon Credit was due to end.
RDL, 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 since last year and hoped the arbitration would force it to reveal and segregate its assets.
But Princeton filed for bankruptcy on Friday, which has stalled the proceedings.
RDL said in a stock market update that the proceedings may at least reveal the value of Princeton’s holdings.
“The company is disappointed that the bankruptcy filing has stalled the first phase of the arbitration, but believes that the bankruptcy filing does give rise to potential benefits in the process of getting visibility into the Princeton Funds’ portfolio valuation and ultimately redeeming the investment it has made,” RDL said.
“Specifically, now that a bankruptcy petition has been made, the activities of Princeton will be monitored by a bankruptcy court.”
In its bankruptcy petition, Princeton represents that it has estimated assets of between $50m (£36m) and $100m, whilst estimated liabilities are between $1m and $10m.
Commenting on the latest developments, analysts at Numis suggested this could add more uncertainty for RDL investors.
“Ranger Direct Lending is trading on a 23 per cent discount to net asset value, which we believe reflects a loss of faith in the fund following repeated write-downs, totalling more than 10 per cent of assets, from its exposure to Argon Credit/Princeton,” Numis said.
“The bankruptcy of Princeton further highlights that uncertainty around the investment, about which the manager has very little information, and we would not rule out potential for further write-downs.
“We do not expect any significant narrowing of the discount until there is further clarity about Princeton.”
The Numis note also expressed caution about the fund.
“We have been wary of the fund, believing that it was invested in platforms with a higher risk profile than its peers,” it said.
“In addition, we believe that the Argon Credit investment raised significant questions over the manager’s due diligence.”