Ranger Direct Lending has reported interim results covering the first half of 2016. The proceeds of the initial public offering (IPO) on 1 May 2015 and December’s secondary issue of Ordinary Shares were all substantially deployed by the end of 2015, so Ranger began 2016 with all of its assets committed to Debt Instruments, less approximately 4% for general fund operations and foreign exchange hedging settlements. This meant that by February, the monthly NAV increase had reached the Investment Manager’s target rate of 70 to 80 basis points, leading to NAV growth of 4.43% over the period (in US dollars).
In Sterling terms, Ranger’s NAV growth in the first half of 2016 was much higher at 12.33%, but this was entirely a consequence of the sharp fall in the value of Sterling as a result of the United Kingdom’s referendum vote on leaving the European Union (commonly referred to as ‘Brexit’) on 23 June 2016 as over 90% of the Company’s assets are denominated in US dollars. It should be noted that this rapid rise in the Company’s NAV led to Ranger’s shares trading at a discount to NAV of over 17% at the end of the period, although this has since narrowed substantially.
Ranger’s portfolio now consists of Debt Instruments issued by eleven different direct lending platforms across a variety of industries. Secured lending makes up over three quarters of the portfolio and while a detailed breakdown can be found in the Investment Manager’s report, it is important to highlight that loan losses to date remain below original projections and are covered by the loss reserves.
The net returns from the portfolio have allowed quarterly dividends to increase from 14.62p per share in February, to 20.45p in May and 26.87p in August after the period end. However, to reach the 10% yield targeted at the time of IPO, it was always envisaged that some degree of leverage would be necessary and significant work has been undertaken in the period by the Board, the Investment Manager and the other service providers to secure the appropriate facility. They were pleased therefore to be able to conclude a successful issue of zero dividend preference shares shortly after the period end, through the ZDPco. This raised GBP 30 million for further investment and should assist in seeking to achieve the long term target dividend rate of 10%.
Since the Company completed its IPO on 1 May 2015, it has deployed capital through a number of Direct Lending Platforms in the US, UK, Australia, and Canada, focused primarily on secured Debt Instruments. The number of platforms remains at eleven as of 30 June 2016 (31 December 2015: 11). With a continuing focus on diversifying the portfolio, final negotiations are underway with two additional platforms through which investments are expected to happen in Q3 2016. In addition, the Investment Manager is also in early stage negotiations with other new Direct Lending Platforms, all with the potential to meet or exceed the Company’s investment objectives.
In addition to investing in Debt Instruments, the Company may also invest up to 10% of gross assets in the equity of Direct Lending Platforms and/or organisations serving the direct lending industry. As of 30 June 2016, no such equity investments have yet been made, but the Company is currently in late stage negotiations with a possible equity investment opportunity.