20 exits of portfolio companies since the beginning of the fourth quarter of 2008. Their web page shows the following exits.
10/15/2009 American Capital Receives $15 Million in Proceeds from Sale of Equity in HomeAway, Realizes $4 Million Gain 09/16/2009 American Capital Receives $182 Million In Proceeds From Sale Of Axygen BioScience 09/14/2009 American Capital Realizes $16 Million Gain From Portfolio Company Exit 07/16/2009 American Capital Completes Sale of People Media, Receives $57 Million in Cash Proceeds and Realizes $15 Million Gain 05/05/2009 American Capital Realizes $31 Million Gain From Sale of Piper Aircraft 04/14/2009 American Capital Receives Cash Proceeds of $22 Million From Sale of Corrpro Companies
Anyone remember any other exits besides the BKs?
Could we be are in for more exit announcements? It only took 6 weeks to announce this one.
It is unlikely that the creditors will force bankruptcy because they will only be harming themselves. If that was their strategy, they would have done that by now. In bankruptcy, payments to the creditors will immediately stop until the judge can approve a workout plan. Since the creditors are generally unsecured, their leverage is minimal. In bankruptcy these loans would become "non-performing" on their balance sheets which would hurt their financial results and be a hit to their stock prices. It makes little sense for the creditors to take that trade off vs ACAS being current on their loans and collecting penalty interest, making the loans highly profitable for the banks at the moment.
Besides collecting bonus interest, the creditors are getting their costs related to renegotiating a new deal paid by ACAS, and the end result will likely be a better deal for the creditors than they had before the default. In bankruptcy, the creditors would incur substantial new costs, further reducing their profitability of their loans to ACAS. Why would they want that?
How bad the new deal will be for ACAS depends on many factors, but I believe their new deal will be somewhat better than what ALD agreed to. ACAS has generated huge amounts of cash which gives them flexibility in paying down debt, buying back debt at a discount, etc.
The third quarter results and ACAS comments about the future will set the direction of this stock for the next few months. I am hopeful the huge writedowns are in the past and that we will get a more positive spin from management on the near future. I also believe more portfolio sales will be forthcoming in the short term, further increasing their odds of an acceptable renegotiated deal with the creditors.
Finally, the argument that ACAS is being hurt financially by selling their best portfolio holdings and being left with the "dogs" has little merit. The worst performing companies in their portfolio have already been written down to low values, and many of them likely have more upside potential than their best holdings as they go through a workout period. Further, ACAS has many holdings and have only sold a handful. They still have a mix of high performers and companies under stress.