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Ranger reports on disappointing and frustrating year

Ranger reports on disappointing and frustrating year – Embattled Ranger Direct Lending has published its annual report for the year ended 31 December 2017. As its chairman points out, 2017 was a disappointing and frustrating year for the company. Total NAV returns fell by 2.95% in US dollar terms, but a sharp decline in the share price, which fell by 31.8% in sterling terms, widened the share price discount to NAV from 13.6% to 29.4%. Dividends paid increased from 89.61p in 2016 to 101.76p in 2017.

On Princeton, the chairman says “The lack of detailed information on the investments underlying the company’s holding in Princeton Alternative Income, LP meant that last year’s financial statements were qualified in respect of this holding. Further efforts to clarify the value of these assets and to agree a redemption timetable proved fruitless and consequently the company filed for arbitration in June 2017…     …these hearings began in November, but extended into January and then March 2018. As the arbitration proceedings were drawing to a close, Princeton, and its general partner, Princeton Alternative Funding LLC (the “General Partner”) filed for Chapter 11 bankruptcy. The bankruptcy hearings began in April and, through its representatives, the Company has been actively participating in the bankruptcy cases with a particular focus, to the extent possible in the circumstances, on seeking to protect its invested capital. One of the motions Ranger filed was a motion to instruct Princeton and its auditors to respond to the Company’s information requests and on 13 April 2018 this motion was granted by the bankruptcy court. Despite this order, Princeton and its associates have not yet given the Company or our external auditors access to this information and therefore, regrettably, these financial statements have been qualified on the same basis as last year’s. However, it is expected that Ranger will be able to examine the relevant documents in the next few weeks and any new information relating to the valuation of the Princeton assets will be released to the market as soon as possible. A further summary of this process and its implications is set out in the Investment Manager’s report, but our priority remains to protect the Company’s capital investment to the extent possible and eventually realise this investment.”

The holding in Princeton was valued at USD 29.3m as at 31 December 2017, following two write downs in 2017. The first, of USD 10.4m, was reported by Princeton themselves in November 2017, but the second, of USD 9.1m, was taken by the company following a review of information provided during the arbitration process.

The results of the review of the fund’s management arrangements will be announced by early May.

Correspondence with Oaktree

Oaktree sent Ranger a second letter on Friday – the text is given below:

Dear Directors of Ranger Direct Lending,  In Ranger Direct Lending’s (“Ranger” or the “Company”) RNS dated April 24, the Ranger Board of Directors (the “Board”) disclosed that it is “engaged in an active and positive discussion with shareholders.” In the RNS the Board also said that it is essential “to achieve sufficient consensus between the Board and shareholders on the Company’s future direction.”  Oaktree strongly agrees with these sentiments. Ranger is at a critical juncture and facing major decisions that will impact future shareholder value. For this reason, we believe it is imperative that the Board give all shareholders a voice in these decisions through a full shareholder vote. We understand that you are required to hold a shareholder vote for any material change in investment policy; however, we urge you to publicly commit to a full shareholder vote on any future investment management arrangements with which the Board wishes to proceed, regardless of whether it is required.  In our April 11 letter to you, we outlined the structural challenges faced by Ranger as well as the clear shareholder benefits of a wind-down. At such an important time for the Company, we believe it is imperative for you to give all Ranger shareholders a voice in determining the path forward. This would demonstrate that the Board takes its fiduciary obligations to the Company seriously and is acting in the best interests of the Company and of its shareholders as a whole.  Conversely, we believe it would raise significant governance questions if the Board were to adopt a new long-term investment management arrangement – thereby locking in new fees and potentially risking disruption to the existing portfolio – without allowing all shareholders a voice on the matter in an open and transparent way.  We believe that the question of future shareholder value is important for all shareholders and accordingly we will be making this letter public.”

RDL : Ranger reports on disappointing and frustrating year

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