Oaktree pushes for liquidation of UK-listed direct lender

The Los Angeles-based firm has identified several hurdles it says would need to be resolved before Ranger Direct Lending could remain a going concern.

Oaktree Capital Management is pushing for the wind-down of the publicly traded Ranger Direct Lending Fund, an effort the latter is rebuffing as it prepares to publish the results of a review process.

Los Angeles-based Oaktree on Tuesday publicly released a correspondence it sent to the board of Dallas-based Ranger. The review process, announced in January, valued the company’s assets, save its investment in the Princeton Alternative Income Fund, and considered different paths forward for the fund.

Oaktree, which is Ranger’s second largest shareholder with an 18.56 percent stake, argued the investee is a “sub-scale platform” that has stock “too illiquid to attract large institutional investors”, especially with the fund’s “persistent trading discount”. The firm’s shares traded at a 25.35 percent discount, with a net asset value per share of $13.48 and a share price of $10.06, as of 28 February. The stock closed at $11.02 on Wednesday.

“We have now come to the conclusion that RDL shareholders’ interests are best served by winding down the Company and returning its capital to its shareholders, which represents both the lowest risk and highest return path forward,” Oaktree wrote.

Representatives for Oaktree nor Ranger were not available for comment.

In addition to the platform and illiquidity of shares, Oaktree said Ranger competes in specialised asset classes where competition is fierce and noted meeting the targeted returns is “increasingly difficult” in the current debt investing atmosphere. The Los Angeles-based stockholder also asserted the firm’s evergreen fund format is not “ideally suited” to its niche debt strategies.

Ranger’s portfolio returned a 7.7. percent loss in the last three months of 2017, according to the firm’s fourth-quarter results. The portfolio consisted of 86 percent secured and 14 percent unsecured debt as of 28 February, according to the firm’s most recent monthly update.

The portfolio has the most exposure to the US, with 82 percent of its holdings there, while 6 percent of the positions are in Australia, 6 percent in Canada and 7 percent in the UK. Its largest holdings by sector are platform debt (20 percent), unsecured consumer and commercial real estate debt (both 17 percent) and business loans (16 percent).

For its part, Ranger said in its response that Oaktree has “no serious interest” in working on the review process and that Oaktree was “solely driven by their short-term considerations”.

Ranger also said it has looked at a partial or full liquidation of the company and returning the proceeds to its shareholders, but said Oaktree’s proposed course of action, without considering other alternatives, would not achieve the top value for Ranger’s assets and protect dividend payments.