US bank lender EJF plans tender offer as wide discount persists

The high-yielding debt fund offers investors the chance to offload part of their holding at a much tigher level than the discount.

EJF Investments (EJFI ) is moving closer to its first tender offer, as the specialist listed debt fund continues to trade at a wide discount. 

EJFI, which primarily lends to small banks and insurers in the US, announced today that shareholders will soon be able to tender up to 5% of their shares at a 5% discount to the portfolio’s net asset value (NAV). 

That comes as the £74m investment trust continues to trade at a wide 24% discount despite solid performance this year. 

In November last year, 8.9%-yielding EJFI announced it would implement a ‘liquidity option’ allowing investors to tender up to 5% of the outstanding shares for cash each year. 

The relatively small scale of the redemption opportunity is designed to balance the trust’s aim to scale up long term, which could attract more buyers among institutions like wealth managers. 

John Kingston III, the chair, said: ‘Although the manager has taken constructive steps to narrow the discount meaningfully over the past 12 months and the share price has increased 27.5% over that period, the board is determined to have the company’s shares trade closer to net asset value.’

Formal documentation on the tender, which will be based on the end-of-August NAV, will be published in the middle of this month.

The fund management group, its employees and connected parties – which collectively hold around 26% of the shares – have confirmed they will tender none of their holdings. Directors on the board have made the same commitment. 

Panmure Liberum analyst Shonil Chande noted that EJFI’s shares have performed well over the past year, ranking it in the top 10 among alternative investment companies. That comes as the discount, which stood at around 36% a year ago, has started to narrow. 

However, returns from the underlying portfolio have been more muted, with only a modest NAV total return year to date, as dollar weakness has detracted amid Donald Trump’s aggressive imposition of tariffs on trading partners. 

EJF’s portfolio is heavily exposed to the American domestic economy. Nearly 70% of the fund is in securitised debt lending to a pool of small US banks, where lead manager Neal Wilson had been hoping increased M&A under Trump would deliver a boost.