Allied Capital: The Angst Continues

In what appears to be a response to a New York Times piece over the weekend, Allied Capital (ALD) issued yet another press release providing "additional comment on Business Loan Express..." Its BLX unit has been the focus of increased scrutiny since news broke last week that a former top exec of BLX (who earlier had also been a top exec of Allied) was indicted on charges of fraud tied to SBA loans.

The Times advanced the story, saying the SBA is considering suspending the preferred lending status of BLX, "pending the outcome of an investigation." The Times also wrote that the SBA also suspended BLX's ability to sell loans it issues to large institutions in the secondary market, which is a considerable source of cash for BLX.

In its latest response, Allied said that it "will stand behind any financial commitments BLX makes to the SBA in this regard to prevent any loss due to fraud." By agreeing to make the SBA whole, it now appears that the potential impact to Allied isn't limited merely to its "investment" in BLX, which appeared to be the main implication of a press release last week.

The beat goes on...