Opportunistic Investments by American Capital

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American Capital, Ltd.’s (ACAS) investments in the the past year have been laudable.  The company, along with its affiliate European Capital Ltd., invested more than $325 million in 18 new and existing portfolio companies in 2013. The amount invested was higher than $300 million that the company invested in portfolio companies in 2012.

The investments were made by American Capital’s offices in the U.S. and Europe. The investments made were utilized for private equity firms' company buyouts, refinancings, add-on acquisitions, dividend recapitalizations and to exploit growth opportunities.

Additionally, last year, American Capital closed 30 deals with enterprise values exceeding €50 million through unitranche financing in Europe. This depicts the strong rise in demand for private debt arranged by non-banking lenders in Europe over the past one year.

Notably, American Capital recorded $1.2 billion of cash proceeds from the realization of portfolio investments during 2013. Further, the company continues to have strong investment opportunities this year as it is expected to utilize capital to invest in new companies and at the same time offer additional finance to the existing ones.

American Capital provides flexible financing solutions ranging from a variety of senior debt and unitranche to mezzanine and equity co-investments. Further, the company provides multi-currency funding with a global underwriting platform, thereby boosting growth of its portfolio companies.

Such benefits provided by American Capital compel private equity clients to consider it as an investment partner, which in turn, helps it to diversify. Though the improved portfolio performance is expected to continue with the economic recovery, we believe the low interest rate environment and global cues might act as headwinds in the coming quarters.

American Capital currently carries a Zacks Rank #5 (Strong Sell). However, some better-ranked stocks in the same industry include Gladstone Investment Corp. (GAIN), Horizon Technology Finance Corp. (HRZN) and Main Street Capital Corp.(MAIN). All of these carry a Zacks Rank #1 (Strong Buy).

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Read the Full Research Report on GAIN
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