Back in November 2009 American Capital (ACAS) suggested a deal with its lenders and senior note holders was almost completed. Admittedly, the terms of the package were very, very expensive and required a repayment schedule which might or might not turn out to be a problem. Certainly shareholders had little to crow about except that there was a path out of the uncertainty that has plagued American Capital all through 2009.
Then we heard nothing for weeks. Then, last Friday ACAS filed an 8-K with the SEC reporting that the deal, which was supposed to close by that date,had gained a fortnight extension.
The 8-K announcement suggests the infamous deal is close to being finished but not yet closed viz. the 15 day extension till the end of the month. Maybe it’s the near certainty that ACAS is about to be restructured (check out what that did for MCG Capital whose stock was below $1 a share when everything was in flux , but has rallied since its own dramatic restructuring to near $5) which is causing the stock price of ACAS to rise.
We’ve been speculating about this for a few days now. ACAS is at $4.04 today versus $2.4 on New Year’s Eve. In fact, ACAS is at its highest level since June 2009. There are many debt insiders (dozens of institutions) involved in the restructuring with an advantage over regular common stock shareholders, which could explain this stock rise. We'd be surprised if there was much meat left on this bone after almost daily price increases but who knows? It only underscores how American Capital has gone from a "widows and orphans" investment, appreciated for its dependable and ever increasing dividend, to a favorite of speculators and shorts.
Disclosure: Author holds a long position in ACAS
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