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American Capital (ACAS) Buys back Shares Worth $134.6M

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American Capital Ltd.ACAS announced the repurchase of its common stock worth $134.6 million. The company repurchased a total of 9.7 million shares of its common stock at an average price of $13.82 per share. Number of shares repurchased represent 3.6% of the company's outstanding shares of common stock as of Jun 30, 2015.

Beginning in the third quarter of 2015, American Capital's board of directors changed its share repurchase program. Under the new program, $300 million to $600 million of common stock will be bought at price per share below 85% of the company's most recent quarterly net asset value per share, subject to some conditions. Notably, the repurchases will be made before the spin-off of American Capital Income by the company.

Since the initiation of the capital deployment program in September 2011, American Capital repurchased 117.8 million shares of its common stock for $1.4 billion, including the current buyback. The average purchase price came in at $12.05 per share.

As of Jun 30, 2015, share repurchases improved the company's net asset value (NAV) per share by $2.05, bringing the total to $20.35.

The company is progressing with its capital deployment policy based on the repurchase program it has adopted. According to the plan, American Capital puts aside a certain amount for stock repurchases, on a quarterly basis, which would be used for buybacks if the share price is at a discount to its NAV per share. The quarterly amount depends on the company's cumulative net cash from operating activities in the prior quarter and need of capital for completion of its spin-off transaction.

Further, cash and cash equivalents in hand, 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.

The authorization of the new share buyback program raise our hopes for an enhanced investor confidence in the company.

During second-quarter 2015, the company made new investments of $976 million while strengthening its balance sheet. American Capital recorded $594 million of cash proceeds from the realization of portfolio investments.

In spite of the volatile capital markets affecting valuations of the investment portfolio, the overall underlying performance of American Capital's portfolio companies continues to remain a positive. Also, we are encouraged by the company's continued efforts in balance sheet repositioning.

Moreover, the completion of the split will help American Capital focus on its core asset management business and benefit its shareholders. Such a move will make the business transparent for the investors and make the company more competitive in the market.

Though the low interest rate environment and global cues might act as headwinds in the upcoming quarters, we believe the improved portfolio performance is expected to continue with the economic recovery.

American Capital currently carries a Zacks Rank #1 (Strong Buy). Other companies in the same sector worth considering include Golub Capital BDC, Inc. GBDC , Saratoga Investment Corp. SAR and Alcentra Capital Corporation ABDC . All three companies carry a Zacks Rank #2 (Buy).

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AMER CAP LTD (ACAS): Free Stock Analysis Report

GOLUB CAPITAL (GBDC): Free Stock Analysis Report

ALCENTRA CAPITL (ABDC): Free Stock Analysis Report

SARATOGA INVEST (SAR): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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