not_my_business

Deep Value in American Capital Strategies

Jonathan,

To your point regarding limits on their ability to buy-back their public debt, there are no restrictions. This has been confirmed with mgmt.

NMB


On Apr 14 10:56 PM Jonathan Christopher wrote:

> Some thoughts:
> 1. Buying debt at below face value will increase equity by the difference
> between face value of the debt and the amount paid. That is a good
> thing. However there are often strict limits on how much debt a
> company can buy back.
> 2. While a reverse stock split is only a paper exercise and does
> not change the equity situation, investment firms are often limited
> to buying stock with share prices above $5 or $10 dollars. the end
> result would be to increase the market available to buy the stock,
> which COULD result in increased interest, volume and a REAL increase
> in price.
> 3. The ACAS web site has not caught up with reality. An additional
> 10 to 15 million shares were issued as a result of the absorbtion
> of European Capital into ACAS. The 67.7% that ACAS had already owned
> was carried on the books as about $300 million, the market value
> of the European Capital shares. However since the total equity
> of the European operation can now be carried on the ACAS books, ACAS
> has picked up a net increase in equity of somewhere between $400
> and $800 million shares. That will go a long way to cure the covenent
> violation.
>
> I just purchased another 10,000 shares.
>

Deep Value in American Capital Strategies

Jonathan,

To your point regarding limits on their ability to buy-back their public debt, there are no restrictions. This has been confirmed with mgmt.

NMB


On Apr 14 10:56 PM Jonathan Christopher wrote:

> Some thoughts:
> 1. Buying debt at below face value will increase equity by the difference
> between face value of the debt and the amount paid. That is a good
> thing. However there are often strict limits on how much debt a
> company can buy back.
> 2. While a reverse stock split is only a paper exercise and does
> not change the equity situation, investment firms are often limited
> to buying stock with share prices above $5 or $10 dollars. the end
> result would be to increase the market available to buy the stock,
> which COULD result in increased interest, volume and a REAL increase
> in price.
> 3. The ACAS web site has not caught up with reality. An additional
> 10 to 15 million shares were issued as a result of the absorbtion
> of European Capital into ACAS. The 67.7% that ACAS had already owned
> was carried on the books as about $300 million, the market value
> of the European Capital shares. However since the total equity
> of the European operation can now be carried on the ACAS books, ACAS
> has picked up a net increase in equity of somewhere between $400
> and $800 million shares. That will go a long way to cure the covenent
> violation.
>
> I just purchased another 10,000 shares.
>

Deep Value in American Capital Strategies

Andy,

Why do you insist on spreading false information when I already clearly corrected you on this on the Yahoo board?

You wrote:

"Take a look at the last (successful) proxy. It gives ACAS an opportunity to sell 42 million shares below NAV. Those shares are not shrunk by the prel proxy being circulated now. "

That statement is PATENTLY FALSE.

PLEASE just read this and stop spreading purposeful misinformation.

"If stockholders approve the Proposal, we may only sell ... up to an additional 42,812,640 shares of our common stock, which is 20% of the number of shares of common stock outstanding as of the record date, subject to adjustment for shares issued following the occurrence of events such as stock splits, stock dividends, distributions and recapitalizations ..."

NMB


On Apr 12 03:18 PM andydee wrote:

> "There is, however, a wrinkle or two.
>
> "The first one is that while IRS rules require BDCs to pay dividends,
> there's a temporary waiver in place (because so many BDCs and REITs
> have become too insolvent to pay cash dividends), which allows them
> to pay 90% of the dividend in stock. Newly-issued stock, that is."
>
>
> Actually, the waiver, I believe, permitted an additional 10% more
> than the existing maximum of 80% of the dividend in newly issued
> stock.
>
> "I cannot for the life of me figure out why anyone thinks that receiving
> a dividend in stock does them any good at all, since each shareholder
> still owns the same proportional value of the company's equity; other
> than some minor tax adjustments, it's a purely symbolic gesture."
>
>
> "Symbolism" AND "retention of liquidity". It is my opinion that,
> absent issues with liquidity and lenders reluctant to let even a
> bit of the "Current Assets" to go back to share owners, Malon and
> company would prefer to pay dividends in cash. If management had
> a choice, that's what they would do, imo. I don't think the holders
> of the unsecured debt will let them.
>
> "The company has made no commitment as to the use of stock vs. cash.
> An announcement is due June 15th."
>
> No later than June 15th. We could hear about it sooner than that,
> but, imo, after "favorable" Q1 results are announced - and after
> a favorable vote on the (now prel..) proxy, scheduled for June 11.
>
>
> www.sec.gov/Archives/e...
>
>
>
>
> "The next wrinkle is potentially even more dilutive.
>
> "A BDC can only thrive if it can raise capital. ACAS cannot get new
> loans due to the covenant violations of previous loans. It could
> issue new equity, but its bylaws require new shares to be sold at
> no less than book value; not possible, with current shares trading
> so much lower."
>
> I agree with your notion that capital will permit a BDC to "thrive".
> It can grow without new capital, in a welcoming environment - which
> we don't have now. BDCs can grow by using "realizations" - principal
> and interest payments by the existing portfolio companies as well
> as the occasional sale of a "mature investment", be that equity or
> debt.
>
> However, I think you may have overlooked something important. Take
> a look at the last (successful) proxy. It gives ACAS an opportunity
> to sell 42 million shares below NAV. Those shares are not shrunk
> by the prel proxy being circulated now. Check out the current proxy
> and the one issued earlier this year. The 42 million shares mentioned
> in the Jan proxy was 20% of the outstanding shares as of Jan 6th,
> 2009, THE record date for that proxy.
>
> "The company has proposed a way out of this dilemma: a reverse stock
> split, to bring the share price back in line with the book value."
>
>
> No. A reverse split can only protect them from de-listing which may
> very well be a condition imposed by the lenders, or by NASDAQ.<br/>
>
>
>
> "if the company needs capital, issuing new shares after a reverse
> split would help the balance sheet."
>
> "Help" in the sense that it provides capital to take advantage of
> outstanding bargains in this environment.
>
> "Other than the writedown of assets last year, the company continues
> to make money; only about 2% of their loans to portfolio companies
> are non-performing. "
>
> As pointed out earlier, that's 2% at "Fair Value". Much higher if
> considered at cost...
>
>
> "But even without cash dividends, the stock is attractively valued.
> And if the markets continue to improve in general, they will be able
> to profitably exit more portfolio positions, thus raising capital
> for new investments."
>
> Agreed.
>
> "If market forces continue to put pressure on the portfolio, however,
> I don't think it will make much difference whether the stock is reverse-split
> or not; having a respectable stock price doesn't make an attractive
> investment when your business sucks."
>
> They are in a lot of different businesses, one of the many attractions
> BDCs have. But, certainly if the global economy does not get out
> of the "funk" it is in, and soon, by the end of 2010 for sure, things
> won't be very good for ACAS.
>
> Are you an optimist? I think all "longs" must be.
>
> Otherwise, play the other side.

Deep Value in American Capital Strategies

Alan,

The arguement FOR the reverse split is to get the stock to a price that will remain listed (> $1) and will be OK for institutions to hold (> $5-$10). These accomplishment of these two items will indirectly facilitate more investment by stronger hands which indirectly can tend to push the $$/NAV closer to 1.

The only direct result of a RS is a higher NAV/share with usually a proportionate increase in the $$/share. The $$/NAV and the % ownership of existing shareholders remains unchanged directly.

Hope that help and congratulations on the courage of being able to say "oops".

NMB


On Apr 12 04:15 PM Alan Young wrote:

> I'm honored to have input from so many knowledgeable people. I see
> a very constructive discussion all around.
>
> Tourguide: I agree that buying back debt would appear to be a good
> tactic.
>
> Augustus, NMB, and User 105499 -- okay, I will admit to some confusion
> here-- I took the point (perhaps thoughtlessly) from the company's
> SEC filing, here:
>
> phx.corporate-ir.net/p...;p=irol-SECText&am...
>
>
> ... but perhaps I misinterpreted their argument -- or was it bogus?
> I'd be happy to get more clarity about this.
>
>
>

Deep Value in American Capital Strategies

BOOO! BOOO! HISSSS!!

>> The company has proposed a way out of this dilemma: a reverse stock split, to bring the share price back in line with the book value.

I have often respected the insights I've read here, but this statement above demonstrates a misunderstanding, AT THE MOST BASIC LEVEL, what a stock-split is, how it effects a company's balance sheet, on a BDC's ability to issue equity to raise capital, and the effect on stockholders equity position in a company.

A BDC is restricted to selling stock below NAV. In a reverse split, the ratio of the stock price to NAV DOES NOT CHANGE!

You should be very ashamed that you posted something so inane.

NMB

Is Pennantpark the Best Business Development Company Around?

The only thing I actually wrote was the politics statement .. you are correct .. I have written that I think investment boards are not a place to scream at each other about politics.

NMB

On Mar 31 06:19 AM Edit or perish wrote:

> Well, thanks for sharing ... and wasting our time.
>
>
> "While I don't have a lot of time to diversify my portfolio ...<br/>
>
> "I don’t have time to debate politics here..."
>
> "I applaud the ...even if I do not know if the facts are correct.
> "
>
> "Another question, which I have not been able to answer ..."
>
>
> "I hope that helps.
>
> NMB"
>
> Not really. You've been mindlessly pumping this stock and (allegedly)
> buying it all the way down.

Is Pennantpark the Best Business Development Company Around?

NMB wrote:

"So far, ACAS has accumulated ~$0.90/shr in NOI's so far in FY2009 that must be distributed to shareholders by Sept 2010 .. along with 90% of whatever they make in the 1st 3 calendar quarters of 2009, which will likely be a total of about $1.50/shr."

I made a mistake here .. sorry.

The NOI's for the first FY quarter of 2009 (Q4-08), NOI was only ~$0.20 after one time charges. I would think the average NOI before OTC's will be $0.45/shr .. and maybe figure more OTC's thru the 1st 3 quarters of '09. So, the FY2009 NOI's will probably be in area of $1.30-$1.40 .. and thus maybe $1.20-$1.30 payable as div's by Sept 2010.

NMB

Is Pennantpark the Best Business Development Company Around?

I am a frequent contributor to ACAS's Yahoo message board as well as a sizable investor with over 200k shares.

Before the downturn, ACAS was paying ~ $4/shr dividend. Currently, they have roll-over NOI's from 2008 of ~$300M that must be distributed by Sept 30, 2009. The IRS is allowing REIT's and BDC's to use stock-dividends to satisfy their NOI distribution requirements this year, so it is likely that this $300M will be distributed as 90% stock and 10% cash, but my guess is that it will be 75% stock and 25% cash to assist stockholders with tax liabilities.

So far, ACAS has accumulated ~$0.90/shr in NOI's so far in FY2009 that must be distributed to shareholders by Sept 2010 .. along with 90% of whatever they make in the 1st 3 calendar quarters of 2009, which will likely be a total of about $1.50/shr.

Looking at NAV, ACAS last reported ~$15/shr. Most believe that Q1-09's NAV will be somewhere between $11-$13/shr and that these writedowns will be leveling off this year, with a low-end NAV of approx ~$8 - $10.

ACAS has is currently trading in the $2's. It is likely that a $2 investment will pay at least $1.50 in 2010 and given that ACAS returns to ~0.50/qtr-shr NOI's in 2010, ACAS should be distributing ~0.40/qtr-shr after 2010 and thus support at least a $15 stock price in 18 months.

I hope that helps.

NMB