American Capital shares jump on debt restructuring

American Capital shares jump on debt deal; Private equity firm also posts positive 3Q results

• On 12:40 pm EST, Wednesday November 4, 2009

NEW YORK (AP) -- Shares of American Capital Ltd. rallied Wednesday after the private equity firm said it reached a deal to restructure its debt, on top of reporting positive third-quarter results.

The stock gained 27 cents, or 10 percent, to $2.98 in midday trading, after earlier spiking as much as 24 percent. Volume was already double normal trading.

Late Tuesday, the Bethesda, Md.-based investment firm said it reached a deal with lenders to restructure its revolving line of credit, which the company said would provide a basis for restructuring all of its $2.4 billion worth of unsecured debt.

The deal, which is not yet finalized, calls for American Capital to pay $450 million of debt off immediately and pay the rest off over four years.

Earlier this year, American Capital breached certain financial covenants in its revolving credit, its $550 million of publicly issued bonds and $390 million in privately placed term notes, causing events of default.

One significant positive point in the deal is that the closing fees are low, said analyst David J. Chiaverini of BMO Capital Markets.

Separately, American Capital posted net income of $77 million, or 30 cents per share, reversing a year-ago loss of $548 million, or $2.63 per share.

Adjusted earnings came to 12 cents per share, matching the average estimate of analysts polled by Thomson Reuters.

The firm sold off $463 million in investments, and Chairman and CEO Malon Wilkus noted in a statement that for the first time in nine quarters, its portfolio value increased.

Those divestitures put the company in a strong bargaining position for negotiating the debt refinancing by providing substantial liquidity, said analyst Matthew Howlett Fox-Pitt Kelton Cochran Caronia Waller, in a note to clients.

Buzz up!