RANGER Direct Lending (RDL) has been given the go-ahead to resume its arbitration proceedings against one of its holdings as the investment trust expressed hope that the “end of a very difficult period” is in sight.
RDL has been in an ongoing legal dispute over its Princeton holding’s level of exposure to bankrupt lender Argon since last year and hoped the arbitration would force it to reveal and segregate its assets.
The proceedings were due to close in March but Princeton unexpectedly filed for bankruptcy hours before the arbitration was supposed to end.
A stock market update on Monday revealed the bankruptcy court in the US had said the hearing could now resume, but no date has been provided yet.
“(RDL) will seek the earliest dates available to resume the arbitration proceedings after the bankruptcy court has issued its written orders on these matters,” the RDL update said.
“The company views this as a positive development and, once the arbitration panel has delivered its findings, will continue to seek relief in the bankruptcy court, including its pending request before the bankruptcy court for the appointment of an independent trustee to assume management and control of Princeton.”
It comes as RDL released its annual report for 2017, showing its net asset value (NAV) returns had dipped by 2.95 per cent over the 12 months.
The investment trust said performance had been hit by the Princeton proceedings as well as a lack of shareholder confidence in the strategy, as seen by widening of the discount to NAV from 13.6 per cent to 29.4 per cent over the year.
A message from RDL chairman Christopher Waldron in the annual report said the extent of the share price discount to NAV suggests that shareholders were sceptical about the valuation of the portfolio.
An independent valuation, announced in January, and reported on Monday morning by RDL, confirmed that the valuation of the portfolio was correct.
Waldron said the independent valuation as well as the end of the Princeton proceedings and the possibility of a new manager coming on board should reassure investors.
“The board hopes that during the second half of 2018 we will see a resolution of the long running Princeton saga,” Waldron said.
“By then we will also have recommended to shareholders a well-resourced management structure that will be well placed to take advantage of the continuing opportunities in direct lending.
“I believe we are now approaching the end of a very difficult period for the company and I would like to thank the investment management team for their perseverance and professionalism over the last year.”
RDL rebuffed calls from shareholder Oaktree Capital Management to close the investment trust last week amid its “persistent trading discount to NAV” and difficulties in reaching target returns. These were not mentioned in the annual report.
It is currently on a discount to NAV of 15.9 per cent.
Analysts at Numis said the resolution of the Princeton issues would be a “key milestone.”
“Ranger has had very limited information about the state of the fund, and the resumption of the arbitration is positive news which may provide clarity on Ranger’s exposure and the valuation of the investment,” a Numis analyst note said.
“Even though there remains potential for corporate action we believe the 15.9 per cent discount carries significant risk, given the issues in the portfolio and the potential difficulties in obtaining a consensus between shareholders and the board about the future strategy.”