Allied Capital purchases almost all positions previously held by Ciena's senior lenders

By Jennifer Lanning Drey

Portland, Ore., Oct. 6 - Allied Capital purchased the positions of all senior lenders under Ciena Capital LLC's revolving credit facility with the exception of a $5 million position still held by Citibank, NA, according to a Monday filing with the Securities and Exchange Commission.

Ciena's Chapter 11 bankruptcy filing caused Allied Capital's unconditional guaranty of the obligations outstanding under Ciena's revolving credit facility to become due.

Allied said it has purchased the positions in lieu of paying under its guaranty.

Allied said it paid $319 million to fund the purchase using cash resources of $149 million and borrowings of $170 million on its unsecured revolving line of credit.

At Sept. 30, after accounting for the $319 million payment, Allied had about $200 million in cash and borrowings of $170 million on its $632.5 million line of credit. The borrowings included $124 million in standby letters of credit, of which $103 million were in connection with the term securitization transactions completed by Ciena.

Since Sept. 30, Allied said it has paid an additional $6.4 million in connection with the acquisition of the senior lenders' positions.

Allied will continue to guarantee the remaining principal balance of $5 million, plus related interest fees and expenses held by Citibank.

Additionally, Allied will provide a debtor-in-possession credit facility for Ciena of up to $5 million.

In connection with Allied's continuing guaranty of the guaranteed amounts held by Citibank, Allied has agreed with Citibank that the guaranteed amounts owed to Citibank under the Ciena revolving credit facility will be paid before any of the secured obligations of Ciena to Allied, as well as any DIP financing provided by Allied.

Allied also noted in the filing that the values of Ciena's assets have continued to decline as credit markets and the economy have deteriorated. As a result, Allied expects it will record substantial further unrealized depreciation in the value of its investment in Ciena for the period ended Sept. 30.

Ciena is a New York-based portfolio company for Allied Capital, a business development company that invests long-term debt and equity capital in middle market businesses. The company filed for bankruptcy on Sept. 30 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 08-13783.

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