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Re-examining My American Capital Strategies Position

Excellent backup from shuddacudda.....I got it. Follow up....so the only way to cut dividends and stay in compliance would be to realize losses to reduce statutory income. I.e., sell some "dogs" to raise cash, and at the same time reduce income to reduce the dividend requirement. Thus the company could retrench a bit, reduce leverage and or buy back shares.

Re-examining My American Capital Strategies Position

Excellent article.

A question for David Bui....why should the stock price have anything to do with the 50%/50% ratio of Debt:Equity. I realize debt can't be >50% of total capital. But this rule refers to the Debt and Equity that are on the books, not Debt and Equity market valuations, right?? The required ratio is based on the book equity and the book debt? Meaning stock price is irrelevant for this consideration....Thank... in advance.

Second, comment to shuddacudda....I think they have occasionally paid out >100% of earnings so they could still cut without dropping below 90% requirement. In fact, with the writedowns, they are running accounting losses, and could cut dividend for a while without breaching the 90%. I personally would not be put off by a dividend cut, but I realize most owners would.