American Capital, Ltd.
) announced the amendment of a $600 million senior secured term
loan credit facility, which includes $450 million in loans
outstanding as of Aug 23. JP Morgan Securities, LLC - a unit of
JPMorgan Chase & Co.
) - and BMO Capital Markets Corp., the investment banking
Bank of Montreal
) acted as joint lead arrangers and book runners for the deal.
AMER CAP LTD (ACAS): Free Stock Analysis
BANK MONTREAL (BMO): Free Stock Analysis
HERCULES TECH (HTGC): Free Stock Analysis
JPMORGAN CHASE (JPM): Free Stock Analysis
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The amendment considerably lowered the company's borrowing
expenses. Further, it modified the company's credit agreement by
lowering the interest rate from LIBOR plus 4.25% to LIBOR plus
3.00% and the LIBOR floor from 1.25% to 1.00%.
Additionally, the amendment reduced the scheduled amortization to
$4.5 million annually, from $150 million. It also eliminated the
use of surplus cash flow to pay off outstanding debt in cases
where American Capital's borrowing base coverage was more than
150%. The amendment also raised the advance rates for security,
during calculation of the borrowing base.
We believe the amendment of the credit facility will lead to
increase in the company's capital availability and will also
reduce interest costs, thereby enabling American Capital to make
American Capital was significantly impacted by the global
financial crisis, which limited the company's access to the debt
and equity capital markets. The market disruption and liquidity
crisis also reduced the volume of mergers and acquisitions in the
market, which affected the company's ability to continue
generating additional liquidity.
However, we believe that the gradual economic recovery and an
improvement in interest rates will benefit the company in the
American Capital currently carries a Zacks Rank #5 (Strong Sell).
A better performing stock in the same industry is
Hercules Technology Growth Capital, Inc.
), which has a Zacks Rank #2 (Buy).