Last week, American Capital (ACAS) announced its debt restructuring deal. Pursuant to the agreement, the company has reached a deal with lenders to restructure its revolving line of credit, which would provide for restructuring all of its $2.4 billion worth of unsecured debt by pledging substantially all of the company’s assets. This $2.4 billion of unsecured [...]

(ACAS) American Capital Restructures Debt

Last week, American Capital (ACAS) announced its debt restructuring deal. Pursuant to the agreement, the company has reached a deal with lenders to restructure its revolving line of credit, which would provide for restructuring all of its $2.4 billion worth of unsecured debt by pledging substantially all of the company’s assets. 

This $2.4 billion of unsecured debt involves $1.4 billion in unsecured revolving credit facility, $550 million in public bonds and $415 million in private notes. The announcement came in as American Capital reported gain of 12 cents in third quarter 2009, compared with earnings of 74 cents in the similar period a year earlier. 

During 2008 and in the first three quarters of 2009, the company had been adversely affected by the unprecedented global financial crisis and economic downturn. American Capital has incurred a significant net loss and net unrealized depreciation in its portfolio investments, besides a decline in shareholders’ equity. 

As a result, the company has been in breach of certain financial covenants under its revolving facility and other unsecured debt borrowing arrangements. The breach has led to an increase in interest expenses for the company as the interest rates have been reset at higher levels. 

The restructuring, which is expected to close by the end of the year, calls for American Capital to immediately clear $450 million of debt and pay the remaining over the four-year period. It had also prevented the company from filing for bankruptcy, which earlier the management had threatened to. 

We believe this agreement along with $463 million of proceeds realized from portfolio investment repayments and exits during the third quarter will provide substantial liquidity to the company. Miller Buckfire & Co. will act as a negotiator to the restructuring deal.
Read the full analyst report on "ACAS"
Zacks Investment Research

American Capital’s (ACAS) third quarter operating income of 12 cents per share was a penny short of the Zacks Consensus Estimate. Last year, the company had reported earnings of 74 cents per share. The results were negatively affected due to interest expense for “make-whole” interest accruals and dilution from stock dividend. Total interest and dividend income [...]

(ACAS) American Capital’s Earnings Report Lags by a Penny

American Capital’s (ACAS) third quarter operating income of 12 cents per share was a penny short of the Zacks Consensus Estimate. Last year, the company had reported earnings of 74 cents per share. The results were negatively affected due to interest expense for “make-whole" interest accruals and dilution from stock dividend.
 
Total interest and dividend income for the quarter was $177 million, down 30% from $253 million in the prior-year quarter. The decline in interest and dividend income was due to a decline in the weighted average effective interest rate on debt investments due to a decrease in LIBOR and an increase in non-accrual loans. Total asset management and other fee income for the quarter decreased 36% year over year to $16 million.
 
Operating expenses increased 30% year over year to $160 million. Net realized investment loss was $66 million for the quarter, compared to a loss of $3 million in the prior-year quarter.
 
Credit quality continued to deteriorate, with delinquent and non-accruing loans increasing to $912 million as of Sept 30, 2009, or 21.5% of total loans, compared to $602 million or 10.2% of the total loans in the prior-year quarter. At the end of the quarter, 41 of the portfolio companies were on a non-accrual and past-due status, up from 27 in the comparable period last year.
 
Net asset value decreased 68% to $7.80 per share as of Sept 30, 2009, from $24.43 per share in the prior year period. The net operating return on average equity in the reported quarter was 2.5%, compared to 9.6% last year.
 
In the latest quarter, $463 million of proceeds were received from realizations of portfolio investment repayments and exits. There was $7 million in new committed investments in the quarter.
 
On the same day, the company also announced its debt restructuring program, pursuant to which it would revamp its revolving line of credit, by pledging substantially all of its assets as collateral, providing a basis for reorganizing all of its $2.4 billion worth of unsecured debt. During March 2009, the company disclosed that it had breached debt covenants, causing defaults on debt payments. The restructuring agreement that is expected to close by the end of the year will address the company’s liquidity issues.
Read the full analyst report on "ACAS"
Zacks Investment Research

Schaeffer's Laura Houser takes a look at today's options activity

Schaeffer's Laura Houser takes a look at today's options activity

Your retirement income could be at risk. Many companies are cutting their defined benefit plan and making life more difficult on retirees. General Motors (NYSE:GM) (Detroit, Michigan) is at the forefront, cutting health care to retirees over 65. For those being affected and for those who are looking to escape from tired mutual fund returns, BizRadio's Jack Warkenthien has an idea for you. Stocks like Bank of America (NYSE:BAC) (Charlotte, North Carolina), American Capital (NASDAQ:ACAS) (Bethesda, Maryland), Citigroup (NYSE:C) (New York, New York) and Pfizer (NYSE:PFE) (New York, New York) are all paying large dividends right now that could be your way to beat the market, if you're willing to be a patient investor. And finally, listen in as Mr. Warkenthien points you to the sector to watch as our angst over the sagging economy continues.

The Masters are honored to host this round of Festival of Stocks, so without further adu, let's begin the Festivus.

The one and only James Cullen who Co-Founded CollegeAnalysts.com submits Weyerhaeuser (WY): A Buy on Sum of Parts, Early-Cycle Housing? This is the conclusion of his analysis on Weyerhaeuser.

Alex Garcia who runs Contrarian Value Investing brings us his Interview With William Spetrino Jr. Part II and 4 Underrated Value Investing Books that are worth your time.

Dividends4Life bring us an analysis of Johnson & Johnson (JNJ). For some time now, they've have been looking for an entry point to purchase JNJ. The overall rating has not changed since their first review, but many of the past metrics have changed. Was it enough? Read more.

Sox First writes Subprime explained - crunch time glossary Credit crunch? Credit default swaps? Honeymoon loans? NINJA loans? Negative pledge? The subprime crisis is upon us and investors are confronted with jargon designed to baffle and keep them in the dark. Here is a glossary of key terms you'll need to know to keep ahead of the game. 

MagicDiligence.com posts Examples Of Bad Magic Formula Stocks, the site's moto is to weed out the “bad” Magic Formula stocks and promote the “good” ones.

StockWeb.com authored by Vlada Kynsky all the way from the Czech Republic talks up investing in municipal bonds via ETF or mutual funds.  Picks include:
- Oppenheimer Rochester National Municipals (ORNAX)
- Less aggressive Legg Mason Partners Managed Municipals (SHMMX).
ETF underlying municipal bonds like:
- Lehman Brothers AMT-Free Intermediate Municipal Index ETF (ITM)
- Lehman Brothers AMT-Free Long Municipal Index ETF (MLN)
- Lehman Brothers AMT-Free Intermediate Municipal Index ETF (ITM)
- Lehman Brothers AMT-Free Long Municipal Index ETF (MLN)

Slackerwealth.com 'A Slacker's Quest For His First Million' takes a look at Altria and Honeywell following their deletion from the DJIA in What Happens to Altria & Honeywell Now?

Steve Faber has a useful comparison of the best Disount Online Stock Brokers.

Dividend Growth Investor writes Cincinnati Financial – An insurance stock to own -- CINF is on both the Dividend Aristocrats and High-Yield dividend aristocrats lists.

fivecentnickel.com breaks down What is ‘Shorting’ a Stock?

Money Blue Book lays the smack down with To New Investors, Stay Away From Message Boards! and How to Choose The Best Top Online Brokers - Part 1 of 2.

The Digerati Life has got 5 Hot Tips for First Time Investors.

John Crenshaw writes The Biggest Scam Your Bank Gets Away With Everyday. This little known scam accounts for a huge portion of fees paid to banks every year and is going on right under your nose. The worst part is, it's completely legal.

Cheapo Groovo submits High Dividend Yield Plus Capital Gain Potential -  American Capital Strategies (ACAS). It pays an 11.2% dividend and is $15 below its all time high.

Online Stock Trading writes It Pays To Watch the Bull-Bear Ratio Indicator Here: "I know I am not a chartist, but I have sworn by two technical indicators all my trading life: the S&P Oscillator and the bull-bear ratio."

American Consumer News submits Investments With Artificial Intelligence.

Financial Alchemist with Starbuck's Valuation: A Few Thoughts.

My Wealth Builder submits Stock Purchase Update - Riding Out The Market Decline.  His portfolio is based on a 10/15/07 updated buy list of Potash (POT), Southern Copper (PCU), CNH Global (CNH) and BHP Billiton (BHP) and a January, 2008 stock pick update of Apple (AAPL), Research in Motion (RIMM), Intuitive Surgical (ISRG), Priceline (PCLN), Core Labs (CLB), and Google (GOOG).

Thus concludes the Festivus, thank you to George the Founder of FatPitchFinancials.com for putting this all together.

Investtalk Talking Points: "Looking Deeper Into Capital Allocation".
~ Today's Stocks & Topics: Mortgage, Real Estate, (APC) Anadarko Petroleum Corporation, (FRO) Frontline Ltd, (MAR) Marriott Intl Inc New, (ACAS) American Capital Strategies, (NVR) NVR Inc., (QCOM) QUALCOMM Incorporated, (NEW) New Century Financial Corp M., (TPL) Texas Pacific Land Trust, Portfolio.