American Capital shrinks unsecured credit facility to $1.41 billion, lowers minimum net worth covenant

By Angela McDaniels

Tacoma, Wash., Sept. 30 - American Capital, Ltd. said it amended its unsecured credit facility to reduce the minimum tangible net worth covenant to $4.5 billion plus 40% of new issuances of equity and debt converted into equity after the third quarter.

In connection with the amendment, the size of the facility was decreased to $1.41 billion from $1.57 billion, and it will be further decreased to $1.25 billion on Dec. 31.

The maturity date was changed to March 31, 2011 from May 16, 2012.

Pricing was increased to Libor plus 325 basis points from Libor plus 90 bps, and the unused facility fee was increased to 50 bps from 12.5 bps.

"As we announced earlier this quarter, American Capital has sought to amend covenants in certain of our debt facilities to improve or maintain availability," Tom McHale, senior vice president of finance, said in a company news release.

"While this amendment will increase our borrowing cost, we continue to project that we will rollover more than $500 million of ordinary taxable income and net long-term capital gains, and we expect to meet our total dividend forecast for 2008 of $4.19 per share.

"We also expect to continue to invest in higher yielding subordinated debt, which has very attractive spreads over the cost of this capital," McHale added.

Wachovia Bank, NA is administrative agent on the facility.

As previously reported, American Capital announced on Sept. 15 that it reduced the size of its secured credit facility to $500 million from $1.3 billion and changed the pricing to Libor plus 250 bps with a 50 bps unused fee. Previously, the interest rate was Libor plus 112.5 bps with a 12.5 bps unused fee.

American Capital is a private equity fund and alternative asset management company based in Bethesda, Md.

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