Rdl Realisation Share Discussion Threads

[davebowler] 18/6/2018 10:11

Liberum;
Resignation of Chairman

Event

Ranger Direct Lending's Chairman, Chris Waldron, and one of its non-executive directors, Matthew Mulford, will resign immediately prior to the AGM on 19 June. In addition, Scott Canon (non-independent director) has also confirmed his intention to resign prior to the AGM.

Mr Waldron has determined it is appropriate for him to step down as the company will pursue an orderly wind-up of its assets.

Jonathan Schneider, the company's remaining non-executive director, intends to continue as a director. A vote on his re-election to the board will be held at the AGM.

Liberum view

This will be seen as a victory for Oaktree and LIM Advisors, who have both been critical of the board and its handling of the strategic review process. They had already proposed the appointment of two new directors each at tomorrow's AGM and LIM Advisors had also proposed the removal of the Chairman. It remains to be seen how many of the four nominees are elected on to the board but it would seem likely that the majority of the board will comprise Oaktree's and LIM's appointees.

The stock trades on a -19.5% discount to NAV (-6.7% discount assuming full writedown of Princeton position).

[spectoacc] 12/6/2018 08:30

Oaktree responded; not unreasonable, let's see how the vote goes.

[spectoacc] 11/6/2018 14:09

@itr7 - not seen a response from Oaktree yet, but yes.

Question will be how long it all takes - how quickly can the positions be realised? At what discount? How much do the ZDP's get? What happens re Princeton, the great unknown? There's as much as £2/share riding on Princeton.

[itr7] 11/6/2018 14:05

If I am reading this correctly then, in either event the unwind of the fund is a given which should therefore mean that the discount to NAV should reduce to near zero (less fees etc) - assuming the NAV was properly calculated in the first place.

[davebowler] 11/6/2018 10:23

Liberum;

Board intends to propose orderly realisation process

Event

The proposed new investment manager, Ares Management, has notified the board that it no longer wants to take up the appointment of investment manager of the fund. This follows calls from activist shareholders for a winding-up of the company. The board has therefore concluded that the company should move to realise its assets in an orderly manner.

The independent directors believe it is inappropriate for Oaktree and LIM nominees to be elected to the board at the AGM on 19 June, given a significant number of inaccurate statements by their sponsors. Provided that the current directors make up a majority of the board following the AGM, additional non-executive directors will be appointed to the board to assist with the winding-up process.

The board will commence discussions with both ordinary and ZDP shareholders about a portfolio realisation process and a timetable for winding-up the company. The investment manager has been instructed to assess how best to realise the portfolio in a manner that maximises value for shareholders.

The board has also denied Oaktree's statement that the board sidelined Oaktree's ability to participate in the review process. In addition, Oaktree publicly questioned whether the board had any prior dealings with Ares in a public letter last week. The board has confirmed today that it and its advisers have no such conflict.

Liberum view

Given the large holdings of both Oaktree and LIM, the immediate future of the fund would have been extremely challenging if Ares had been appointed as manager. It is likely that this would have led to a large overhang of stock and made for an extremely difficult transition process. We believe the company had little capacity to acquire stock back from dissenting investors given it is already sub-scale. The shares currently trade on a -19.2% discount to NAV (-6.4% discount assuming full writedown of Princeton position).

[spectoacc] 11/6/2018 07:37

Been very interesting:

"For the Company to have a successful future under Ares' management, it requires a smooth realisation and reinvestment programme alongside encouraging new investor interest to reduce the discount, improve liquidity in the Company's shares and, in time, grow the Company. However, against the potential backdrop of calls by activist shareholders to change the Board and demands for a winding-up of the Company, which could be reasonably be expected to continue whether or not Ares was appointed, Ares has notified the Board that it does not wish to take up the appointment of investment manager to the Company.

Given Ares' decision, the fact that Ares was the preferred candidate and that any other replacement manager would face the same issues, the Board has concluded that in the interests of certainty and protecting shareholder value the Company should move to realise its assets in an orderly manner. The Company's advisers concur with this view. However, the Independent Directors also remain of the view that it is wholly inappropriate for the Oaktree and LIM nominees to be elected to the board, given that their sponsors have led a campaign containing a significant number of inaccurate statements which has culminated in Ares' withdrawal. In consequence, other shareholders will not have the opportunity to vote on proposals that the Independent Directors continue to believe would create the greatest long-term value for shareholders as a whole.

In summary therefore -

1. The Company is withdrawing the proposal that Ares, subject to shareholder approval, be appointed as the Company's investment manager. The Independent Directors would like to put on record their gratitude to Ares for the commitment it has shown throughout this process.

2. The Board continues to recommend that shareholders vote against the Oaktree and LIM resolutions being voted on at the AGM on 19th June 2018 (Resolutions 8, 9, 10, 11 and 12) for the reasons set out below.

3. Provided that the current independent directors make up a majority of the board following the AGM, the Board will appoint additional independent non-executive directors following consultation with shareholders to assist with the winding up and the realisation of the Company's assets in an orderly manner.

Assuming the current independent directors continue to make up a majority of the Board following the AGM, the Board will commence a dialogue with ordinary shareholders and ZDP shareholders about a portfolio realisation process and timetable for winding-up the Company. Any such process will also have full regard for the rights of the ZDP shareholders. In the meantime, the Board has instructed Ranger to consider how best to realise the portfolio in a manner that maximises value for all shareholders. The Board would emphasise that any process of orderly realisation of the portfolio needs to take into consideration the status of the legal proceedings currently in process in respect of the investment in Princeton, and they intend for the Company to continue to actively engage in those proceedings with Ranger until their conclusion.

A further announcement will be made following the conclusion of the Company's AGM on 19 June 2018.
"

[spectoacc] 08/6/2018 09:21

The more I hear, the more I'm with Oaktree & LIM. Do hope they prevail, but fear the discount may not be sufficient to encourage others to also vote for wind-up.

[davebowler] 08/6/2018 09:19

Liberum;
Additional letters from Oaktree and LIM Advisors

Event

Over the past 24 hours, both Oaktree and LIM Advisors have published additional open letters to shareholders in support of their proposals at the AGM on 19 June. The resolutions to be voted on at the AGM will include proposals from both Oaktree and LIM Advisors for the appointment of two additional directors each. LIM Advisors is also proposing the removal of the chairman.

On Tuesday afternoon, the board responded to the fourth Oaktree letter by noting that Oaktree was the only major shareholder not to take up the opportunity of a presentation with Ares management. Ares is in discussion with shareholders on the details of the proposed new policy. The Board expects to publish the EGM circular following regulatory approval.

LIM Advisors published an extensive letter yesterday outlining its opposition to the board's proposals. LIM will vote in favour of the four proposed new non-executive directors. LIM has urged shareholders not to support the calling of an EGM that would enable the hiring of Ares. LIM believes the 2020 continuation vote should be brought forward and proposed at a new EGM as soon as possible.

Oaktree has published another letter today denying that it declined to participate in the review process. It claims the board hindered its ability to participate in the strategic review process. Oaktree has also questioned whether the board is conflicted and asked the directors to disclose any dealings they have had with Ares outside of Ranger.

The shares currently trade on an -18.4% discount to NAV (-5.5% discount assuming full writedown of Princeton).

[spectoacc] 07/6/2018 08:42

Lim (10%) side with Oaktree.

[spectoacc] 06/6/2018 07:36

Another good Oaktree response out this morning. Have to agree with them on time taken to deal with (or not deal with) Princeton.

[spectoacc] 16/5/2018 11:24

Can't disagree with that - upside seems to depend on 1. Oaktree winning out and 2. Princeton resolution.

[davebowler] 16/5/2018 10:51

Liberum;
Event

Ranger Direct Lending's NAV per share at 31 March 2018 was $13.15 per share, representing a NAV total return of 0.01% in the month. The return is calculated after adjusting for 18 bps of Princeton income that has been reserved.

The main reason for the flat performance in March was a $1m write-off related to two large investments. The principal and interest written off reduced NAV by -0.6%. The company continues to pursue recourse against these investments.

The arbitration proceedings against Princeton are due to recommence on 16 May. After the arbitration findings have been delivered, Ranger will continue to seek relief in the bankruptcy court, including its pending request for the appointment of an independent trustee to assume control of Princeton.

Liberum view

The write-down in March is relatively large and will do little to assuage concerns over the performance of the portfolio. The shares have generated a total return of 13% to date in 2018, partly as a result of the wind-down proposals put forward by Oaktree and LIM Advisors. The stock trades on an -18.9% discount to NAV (-6.1% discount assuming full writedown of Princeton) and we see limited near-term re-rating potential given the ongoing uncertainty with the remaining value in Princeton. We await the circular from the Board with further details on its proposal to appoint Ares as the manager.

[davebowler] 04/5/2018 10:02

Liberum;
Ranger Direct Lending (Mkt Cap £126m)

Oaktree publishes open letter to shareholders

Event

Oaktree has urged shareholders to ask the Board to consider the benefits of a wind-down proposal as an alternative to the Ares proposal announced earlier this week. Oaktree is the second largest shareholder in Ranger (18.6% stake) and had previously written to the Board calling for a wind-down of the company.

In the open letter, Oaktree has raised several concerns. They believe the Ares proposal is the result of a biased and flawed process. They do not believe the Board seriously considered a wind-down proposal.

In addition, Oaktree states insufficient detail has been published by the company in relation to the proposal to appoint Ares. The proposal from the Board earlier this week is light on specific details on the new investment strategy, plans for discount elimination and fees for the new manager. Oaktree also believe the Ares proposal carries increased risk in comparison to a wind-down.

Oaktree has criticised the track record of the Board to date and has also questioned the Board's statement that 39% of shareholders support its recommendation. Oaktree states it has been contacted by significant shareholders who oppose the Ares proposal.

Liberum view

Oaktree's letter makes a number of credible points regarding Ranger and the potential benefits of a wind-down proposal. We would expect a response from the Board today. Additional detail is expected to be provided by the Board in the upcoming circular.

The letter still does not address the complicating factor of the ZDP shares in a wind-down scenario. The ZDP shares mature in 2021 and the ZDP shareholders could demand the final redemption value if the company was winding-down. We estimate the additional liability would be c.$14m over and above what has been accrued to date.

The letter also mentions the possibility of cashing-out dissenting investors. We believe it is highly unlikely the company would acquire stock back from dissenting investors given it is already sub-scale. It has happened in the investment companies universe in recent years, but this has tended to be for larger funds with greater capacity to acquire shares. In addition, this would require approval from ZDP shareholders which is highly unlikely. The asset cover levels are already close to the covenant level of 2.75x (we estimate cover is 3.15x including Princeton and 2.83x excluding Princeton).

Ranger currently trades on a -19.4% discount to NAV (-6.6% discount assuming full writedown of Princeton investment).

[spectoacc] 04/5/2018 08:47

Only thing they still haven't addressed is the ZDPs. But will look forward to the Board's response, hopefully less dismissive than last time now that the result of their "review" is out.

[atholl91] 04/5/2018 08:37

Bought around 730p & agree with Oaktree. They should bid for the whole company & go unconditional at 50.1%. Ares performance is inferior to Oaktree. Howard Marks ( founder of Oaktree) quarterly letter to shareholders is read by Buffett each quarter.

[spectoacc] 04/5/2018 07:24

Not sure they're going to win, but agree with them that RDL said nothing whatsoever about the merits of a possible winding-up:

"Funds managed by Oaktree Capital Management, L.P. ("Oaktree"), an approximately 19% shareholder of Ranger Direct Lending Fund PLC (LON: RDL) ("Ranger" or "RDL" or "Company"), released an open letter to Ranger shareholders today regarding the Board's recent proposal to appoint Ares Management ("Ares") as the new investment manager.


The full text of the letter is as follows:


May 4, 2018


Dear shareholders of Ranger Direct Lending PLC ("Ranger," the "Company" or "RDL"),


We write to express our deep disappointment with recent actions by Ranger's Board of Directors (the "Board"), culminating in the RNS announcement on May 1 (the "Announcement"), in which the Board announced its proposal to appoint Ares Management ("Ares") as its new investment manager. We believe that this proposal is the result of a biased and flawed process, adds significant risk and expense to Ranger shareholders, and is further indication of the Board's poor stewardship. The Board has made no attempt to respond to the valid fundamental concerns we raised in our publicly-released April 11 letter, and we continue to believe that a wind-down represents the clear best option for shareholders. We know many of our fellow shareholders agree.


Flawed Strategic Review Conducted by a Biased Board


The Board's announced strategic review has been conducted in a way that we contest vigorously:
-- There is no evidence that the Board has seriously considered a

wind-down for the benefit of all shareholders. There has been no

side-by-side comparison of the benefits of a new manager arrangement

relative to a low-risk, shareholder-friendly, wind-down.
-- In our view, the Board's engagement has been inadequate and

inconsistent, notably in the failure by the Board and its advisors to

honor their agreement as part of the wall-crossing procedure,

specifically by advantaging certain shareholders over those with

dissenting views.


Inadequate and Risky Proposal to Appoint Ares to Run the RDL Portfolio


The Ares Proposal Comes with No Details to Support the Recommendation


Following a three-month review process, we are disappointed that no terms of the proposed new manager arrangements have been communicated and we do not think the Board is taking shareholder concerns seriously:
-- No substantive detail has been provided on the underlying investment

strategy.
-- There are no plans on how Ranger's chronic NAV discount would be

eliminated and over what timeframe.
-- There is no information about how the RDL platform would reach viable

scale under the new investment manager when RDL's illiquidity makes it

patently unattractive for most investors.
-- There are no details on fees or the term of the management agreement.

-- No proposal has been made on how dissenting shareholders would be

cashed out if they so desired, which we have seen occur in several

cases when the investment manager changes in the face of substantial

shareholder opposition.


Appointment of Ares as Investment Manager Carries Substantial Risk Compared to a Wind-Down


The information that Ranger has presented illustrates significant additional risk when compared to Ranger's existing portfolio or a wind-down alternative:
-- Ares' proposal represents a major departure from Ranger's current

short-dated SME whole loan mandate and carries significant new risks

for shareholders, yet does not offer commensurate uplift in return

profile or yields.
-- Ares would invest in structured products that sit lower in the capital

structure, i.e., in higher-risk securities, compared to Ranger's

senior secured whole loan strategy, which is risky at this point in

the credit cycle when corporate defaults are at historic lows and

appear bound for mean-reversion in the period ahead.
-- Ares' multi-year loans are much longer duration than Ranger's

portfolio, which reduces portfolio liquidity and increases exposure to

the credit cycle.
-- RDL would become a passive vehicle with a relatively small allocation

within deals syndicated across the Ares platform and would not have

sole ownership of the underlying loans in the case of defaults.
-- We believe Ares would create risks related to the time it takes to

reposition the RDL portfolio, including redundant fees, potential

delays and a misalignment of interests arising from the 12-month

Ranger Alternative Management II notice period.
-- We are especially cautious about this departure from mandate given

Ranger's and this Board's history - we have seen what happened when

they last stepped outside their comfort zone and reached for yield by

investing in Princeton.


Questionable Claims Made by the Board about Shareholder Support on Ares Proposal


We question the Board's statement that 39% of RDL shareholders support its Board's recommendation of Ares as the new Investment Manager.
-- Since we published our letter dated April 11, we have received a

number of inbound messages from significant shareholders who share our

concerns about the future of RDL and oppose the Ares proposal.
-- If the Board proceeds with Ares' appointment without a cash-out option

for dissenters, we consider that these dissenting shareholders could

put selling pressure on RDL's shares for the foreseeable future.


RDL's Board has a Poor Track Record of Stewardship, Lacks Relevant Experience and Has Lost the Confidence of Shareholders


We view the mishandling of the strategic review process as only the latest in a series of missteps that have led to value destruction and a loss of shareholder confidence:
-- Since its IPO in May 2015, RDL has significantly underperformed a

range of equity and bond indices.
-- This Board presided over the Princeton debacle, which resulted in

massive destruction of value for all shareholders and continues to

contaminate the RDL portfolio with no resolution in sight.
-- This Board took little tangible action to take control of the

Princeton situation until almost a year later when the NAV discount

broke through 30%.
-- This Board's expertise in speciality lending is limited, with only one

current board member having a directly relevant track record in this

field.


Oaktree has given serious consideration to the future of RDL and how we could leverage our extensive credit and restructuring expertise to assist the Company for the benefit of all stakeholders. Regretfully, we believe shareholders have been repeatedly let down by the Board and have now lost faith in continued stewardship of this Board.


We urge shareholders to express their views to the Board, in order to ensure that the Board considers the benefits of a winding down option as an alternative to the Ares proposal.


Sincerely,


/s/ Patrick M. McCaneyPatrick M. McCaneyManaging Director and Portfolio ManagerValue EquitiesOaktree Capital Management, L.P.

[spectoacc] 02/5/2018 09:08

They eased right back on the gearing at IT level when Princeton reared its head tho, and if you look at what the rest of it is in, they'd have to be going some to destroy that much capital. Though with all these types (the likes of SQN, VPC etc), they're untested in a recession, let alone a 2008 crash.

But: there's two options on the table now for RDL:

1. Wind up (per 18% shareholder)
2. Appointment of Ares and lower divi policy (39% shareholder approval thus far, so they say)

So neither of your concerns seems a worry now. There doesn't appear to be another Princeton lurking and if there is, Ares will find it, at a point where ZDP cover is ammple. And even in your worst-case scenario of paying out capital and having some more disasters, they're still reasonably well covered.

Personally, hoping for a wind-up and apportioned ZDP redemption, but I'll happily sit in them until 2021. I've largely sold out of the ords but there's still value there if anything can be recovered from Princeton.

[spectoacc] 02/5/2018 07:26

@erstwhile2 - I agree that was the case before. Not sure RDL is the same beast (ahem) now.

Hope not anyway - whilst I've sold down the ords, I've a lot of the ZDP's.

[davebowler] 01/5/2018 09:03

Liberum;
Ranger Direct Lending (Mkt Cap £129m)

Proposed appointment of Ares Capital as investment manager

Event

Following a review of the company's investment management arrangements, the Board believes a proposal from Ares Management LLC was the strongest.

Under the proposals, future investments will comprise private asset-backed loans sourced by Ares. These loans will be secured on pools of loans originated by specialty finance companies. The transactions will typically benefit from first-loss protection as the specialty finance companies have to provide an equity contribution into the structure. Ares is currently investing in these transactions for a number of institutional clients. Ranger will invest alongside Ares' other clients in eligible transactions. Ares believes Ranger can deliver a high, single-digit dividend yield under this strategy. Most of the assets will remain US Dollar denominated although there is expected to be some exposure to European and Canadian loans.

The portfolio managers for Ranger Direct Lending will be Keith Ashton and Jeffrey Kramer, Co-Heads of Structured Credit. The Ares Credit group has total AUM of $71.7bn, of which $5.8bn is managed by the Ares Global Structured Credit Team.

The company will give notice to the existing manager, Ranger Alternative Management II, LP, today and the contract will have 12 months to run.

The proposed changes will be put to a shareholder vote. A circular will be published with details of the proposed management arrangements and investment policy. 39% of the share register have indicated they are supportive of Ares being appointed as the investment manager.

Ranger currently trades on a -16.2% discount to NAV (-2.9% discount assuming full writedown of Princeton investment).

[scburbs] 01/5/2018 07:29

Fair play to them. ARES is a serious appointment. Different strategy that will cause some transitional issues and lack of clarity on fees and any costs of parallel running, but looks like a potentially viable strategy to me.

[spectoacc] 01/5/2018 07:21

Well they're claiming 39% shareholder support already for the appointment of Ares, but I say this morning's RNS makes winding up more likely.