American Capital Ltd.
) announced that it has repurchased its common stock worth $103.0
million during the fourth quarter of 2012. The company bought
back a total of 8.8 million shares of its common stock at an
average price of $11.72 per share. The number of shares
repurchased represents 2.8% of the company's outstanding shares
of common stock as of Sep 30, 2012.
Since the third quarter of 2011, American Capital has repurchased
52.4 million shares of its common stock for $495.3 million with
an average purchase price of $9.46 per share. This represented
15.2% of the company's outstanding shares as of Jun 30, 2011.
As of Sep 30, 2012, share repurchases improved the company's net
asset value per share by 90 cents. However, the absence of this
share buyback activity would have made it necessary for American
Capital to earn an additional $278 million over the last five
quarters, to record the current level of NAV per share.
Based on a number of factors, the company adopted a new program
in September 2011. In accordance with the plan, American Capital
keeps aside certain amount either for 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 quarters, cash and cash equivalents in
hand, cumulative repurchases or dividends, debt position,
investment plans as well as operational issues. Moreover, the
current trading price of the company's common stock, its
financial liquidity and the ongoing economic conditions are taken
As per the company's plan, if the price of its common stock trade
at a discount to the NAV, it will opt for share repurchase.
However, in case the price trade at a premium, the company will
decide on dividend payments.
The authorization of the new share buyback program and resumption
of dividend payments raise our hopes for an enhanced investors'
confidence in the company. During the last quarter, American
Capital's asset coverage ratio improved substantially to 769%
from 661% in the prior quarter. The company also repaid
securitized debt of $150 million and increased investments by $6
million, while strengthening its balance sheet.
American Capital currently retains its Zacks #2 rank, which
translates into a short-term Buy rating. However, in the same
KCAP Financial, Inc.
) retains a Zacks #1 Rank (Strong Buy).
AMER CAP LTD (ACAS): Free Stock Analysis
KCAP FINL INC (KCAP): Free Stock Analysis
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