American Capital Ltd.
) announced the repurchase of its common stock worth $124.9
million in the open market in the second quarter of 2013. The
company repurchased a total of 9.1 million shares of its common
stock at an average price of $13.77 per share. Number of shares
repurchased represent 3% of the company's outstanding shares of
common stock as of Mar 31, 2013.
Since the initiation of the new capital deployment program in Sep
2011, American Capital repurchased 70.4 million shares of its
common stock for $748.4 million, including the current buyback.
The average purchase price came in at $10.63 per share.
As of Mar 31, 2013, share repurchases improved the company's net
asset value (NAV) per share by $1.23, bringing the total to
$19.04. However, in the absence of this share buyback activity,
American Capital would have been required to earn an additional
$366 million during the past seven quarters since Jun 2011 in
order to record the current level of NAV per share.
The company is progressing with its capital deployment policy
based on the new program it has adopted. According to the plan,
American Capital puts aside a certain amount for either stock
repurchases or dividend payments, on a quarterly basis. The
quarterly amount depends on the company's cumulative net cash
from operating activities in the prior quarter.
Further, since the beginning of 2012, cash and cash equivalents
in hand, cumulative repurchases or dividends, debt position,
investment plans and operational issues also help determine the
quarterly amount. Lastly, the current trading price of American
Capital's common stock, its financial liquidity and the ongoing
economic conditions are also taken into consideration.
As per the company's strategy, if the price of American Capital's
common stock trade is at a discount to the net asset value of
shares, the company will opt for share repurchase. On the other
hand, if the price trades at a premium, the company will prefer
The authorization of the new share buyback program and resumption
of dividend payments raise our hopes for an enhanced investor
confidence in the company. During first-quarter 2013, American
Capital's asset coverage ratio improved substantially to 956%
from 801% in the prior quarter.
Alongside, the company repaid securitized debt of $113 million
and increased investments by $98 million while strengthening its
balance sheet. Moreover, the company recorded $281 million of
cash proceeds from realizations of portfolio investments during
American Capital's successful debt restructuring furnished it
with sufficient operating flexibility. In addition, the company
continues to de-risk its balance sheet through a number of
initiatives including repayment of debt.
Moreover, these steps augment the company's capital position and
reduce interest expenses. 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 upcoming quarters.
American Capital currently carries a Zacks Rank #3 (Hold). Some
companies in the same sector that are worth considering include
TCP Capital Corp.
) with a Zacks Rank #1 (Strong Buy), along with
MCG Capital Corporation
Gladstone Investment Corporation
) with a Zacks Rank #2 (Buy).
AMER CAP LTD (ACAS): Free Stock Analysis
GLADSTONE INVES (GAIN): Free Stock Analysis
MCG CAPITAL (MCGC): Free Stock Analysis
TCP CAPITAL CP (TCPC): Free Stock Analysis
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