67 WALL STREET, New York - December 17, 2013 - The Wall Street Transcript has just published its Business Development Companies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: BDC Risk/Reward Profile - Business Development Companies Historical Overview - Yield Compression Issues - Internally and Externally Managed BDCs - BDC Dividend Growth
Companies include: American Capital, Ltd. (ACAS) and many more.
In the following excerpt from the Business Development Companies Report, the Founder, Chairman and CEO of American Capital, Ltd. (ACAS) discusses company strategy and the outlook for this vital industry:
TWST: Is American Capital the sole participatory in the majority of your financings, or are they cofinanciers?
Mr. Wilkus: As I mentioned, our specialty is One-Stop Buyouts. This is quite unusual. There are over 1,000 buyout firms in the United States and Europe and virtually all provide only equity capital for their buyouts. But the amount of equity capital that they have to implement a buyout is usually insufficient to buy the whole company, so they have to borrow money from third parties. They typically borrow from banks for the senior financing and from mezzanine lenders or business development companies for the second lien or mezzanine financing.
American Capital is different in that we can pay the entire purchase price in our One-Stop Buyouts and then hold the entire amount and reap the returns that the company produces on an unlevered basis. Instead of borrowing at the portfolio company and levering it up, we will borrow at the American Capital corporate level, which will usually be less expensive. That's what we call our One-Stop Buyouts, and it's got a very competitive advantage for the sellers and management teams of the company that is up for sale.
The sellers don't like to pick a buyer who has to go through three different investment committees to decide whether they can afford the price and who will all need to undertake due diligence. That's because most private equity buyers need a senior lender, a mezzanine lender and an equity source, who all have to come to an agreement in the end. Because we can come to the table with the ability to pay the entire purchase price, we have a competitive advantage and don't always need to pay highest purchase price to win a bid. The management team of the company being sold also finds it cumbersome to deal with so many parties. They may also prefer us because they know that third-party lenders can be a source of problems in the future if ever the company has some difficulty in its performance. It's far more likely they can work closely with that owner and work through the issues.
TWST: 2013 is just about done here. Can you provide a brief summary of what you would like to accomplish over the next 12 to 24 months? What will make that time frame a success?
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.