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American Capital, Ltd. Message Board

  • hoosier_investor hoosier_investor Jun 17, 2013 11:04 PM Flag

    Malon Wilkus comments from recent MS conference

    Up until now, we've, of course, been using a lot of our liquidity to reduce our debt load. Fundamentally, we had too great of a debt load going into the recession. And today, we're fundamentally -- as a result of that, we've paid down over $6 billion worth of debt in the last 5 years. And so we're at the level of debt that's just fine in our view. So there's no more need to deploy or redeploy our liquidity into paying down debt. So then it comes to whether there's good investment opportunities. Certainly, we think we made some very good investments in the last several quarters and that -- but at the same time, we've also taken advantage of and bought back a lot of shares as I've pointed out earlier. And we will continue to really pursue all of those things. We think you need a rounded business for the market to trade you to book. And so we're going to continue to work hard doing those things. And finally, I'll say that we are limited to our share buyback program to buying back no more than 50% of our shares over a 3-year period and that would also include anybody else that either exceeds or drops below 5% ownerships. So the 382 limitations does limit us to how many shares we can buy back on a regular basis in a 3-year time frame.

    Above quote is from the Seeking Alpha transcript (see headlines for link)

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    • ACAS should spin ECAS off.
      1) It will get rid of double-discounting ECAS's NAV, instantly bringing the combined NAV of the two companies higher
      2) As a new "independent" company, ECAS could buy up to 5% of ACAS's outstanding shares. Maybe then exchange ACAS's shares with ACAS for ECAS's shares ACAS would still hold after spinoff, retire both, rinse, repeat (not sure if this is kosher accounting rules-wise)

      • 2 Replies to bamboo7431
      • I respectfully disagree. Why spin off, which is essentially a sale as it is a wholly owned sub at the market bottom for Europe. Europe has been in a recession for quite a while and that will not last forever. Later this year as Europe comes out of the recession, ECAS will be valued higher as well as opportunities to expand should present themselves. A little patience here will be rewarded well. Hang tight.

      • I have a similar sentiment. Sell, or IPO ECAS, which could reduce the tax loss carry-over a bit, making large stock buybacks more palatable(not lose as much of the now smaller tax asset)...

    • According to recent conference info, ACAS has repurchased 18% of outstanding shares over the last seven (7) quarters.....while also paying down debt. The chairman now says debt levels are fine and there's 'no longer' a need for accelerated debt reduction.....leaving more liquidity available for the other two options.....1) New Investments, and 2) Share Repurchases. He goes on to say they're limited to 50% repurchase (cumulative) over any 3-year period. Thus, implying they could be planning to repurchase up to 32% of shares over the next five quarters.

      Unless the overall market/economy tanks, ACAS could have a nice tailwind over the next five quarters.

      Additional comments / thoughts?

      • 4 Replies to hoosier_investor
      • Fine information. I doubt they will buy 32% over the next five quarters. Instead I think it will use this looming credit crisis (rate rise) as to add some new additional business and continue to build its top line. Zacks downgrade is historically accurate but may not be as business-wise as it purtains to ACAS conditions. 1. ACAS had to work in previous quarters on reducing debt this however put it in a position to deal as yields do go up therefore it did not make significant moves to raise earnings. 2. ACAS had diluted itself in the past to survive, many BDCs have diluted themselves over the last ever how many quarters to re-factor themselves which may over time become problematic because they will lack reserves combat large economic effects. 3. And probably more importantly ACAS has not left the equity business. Many BDCs have narrowed or even abandoned equity stakes. So as the fed tightens and rates slowly increase asset values will rise therefore equity holding which some have panned will start to look good and ACAS will be beneficiary of this.

        Although this will give ACAS a nice tailwind, as you say, overall market conditions may not yield as great share price benefit until the market becomes re-engaged.

        Good luck to you.

      • I'm down with that!
        Respectfully

      • The buybacks have been very agressive and have worked out very well due to the big improvement in the stock price over the same period of time. What doesn't get discussed is how much stock is being recycled right back into the float through the use of option awards to employees.

        I get concerned about this from time to to time, do some investigating and then decide it may be a problem, but at least they are not awarding the majority of the share buyback to employees. On the other hand, outstanding shares should be down to the low 280s without the option awards. Next time I look at this I will post the numbers that I come up with as it has been more than a quarter since I looked.

        In regard to the selloff in ACAS, it seems to have started in sync with concern about rising interest rates. I am afraid that the longert the overall market takes to roll over and correct, the worse the market selloff will be. I am not sure how ACAS will perform when market heads lower. Seems like ACAS should hold up pretty well as it has already suffered a 15% decline to date.

        Good luck to shareholders,
        thetechnology

      • Recovery period a good time for private equity returns, says Trilantic
        Recovery period a good time for private equity returns, says Trilantic
        By: Caroline Allen 29 Apr 2013 0 Comments and 0 Reactions Print Email Tweet
        Trilantic Capital Partners Europe, the transatlantic private equity team spun out of Lehman Brothers Merchant Banking in 2009 following the firm's collapse, believes 2013 will be a pivotal year for private equity, because the asset class historically provides the best returns in the wake of a financial crisis.
        Vittorio Pignatti, (pictured) chairman of Trilantic Capital Partners Europe, notes that it is a very competitive environment, but power has shifted to investors and fund selectors, who can insist more than before on investing their own terms.

        “Countries have different rules, but the end goal of most is to try to build a long-term investment base. We do think investors welcome private equity, but some have restrictions on investing” Vittorio Pignatti, Trilantic Capital Partners

        Many private equity firms are under pressure to deploy their remaining capital and make the exits they need to achieve before the next round of fundraising. Investors are far more discerning than in previous cycles, where leverage was the main instrument in securing double-digit returns.
        Differentiation by process
        Pignatti, formerly a Banque Paribas executive with experience across the Middle East and in the US, says firms have to differentiate themselves by their process and how they add value to their portfolio companies. Trilantic Europe targets unlisted mid-market firms, and has been active in southern Europe, where many private equity firms fear to tread, after first engaging in 2009.
        "We look for, rather than wait for opportunities," he explains. "And we like to see the glass as half full, not half empty. ..... Respectfully

 
ACAS
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