Attack Parry Riposte

American Capital Strategies: Management Credibility in Question

What's most troubling is the difference in management attititude and action since their end-September press release highlighting the renewal of a credit line and their Q3/08 financial release. Back in late September, they reiterated the dividend. A month later, absolute chaos.

Although all hell broke lose in October, it shouldn't have been a total surprise that things could get worse. Yet they were confident - too confident in highsight - and the market punishes those who promise and deliver a negative surprise.

In a perfect world, they would have set the dividend at NOI and kept cap gains. And in a perfect world, they would have de-levered early with a slighly dilutive equity sale (like ARCC, like KCAP).

You can't fault them for the impossible to foresee, but you can fault them for failing to take actions other BDCs did.