Moody's drops American Capital

Moody's Investors Service said it downgraded American Capital Strategies' senior unsecured rating to Baa3 and placed its ratings under review for downgrade.

Moody's said the downgrade and review for downgrade follows the decline in the company's capital levels due to a series of quarterly losses and requirement to distribute 90% of its taxable income.

This capital decline has increased the company's debt to equity ratio close to its regulatory limit and substantially reduced the cushion over its recently renegotiated minimum net worth covenant, the agency said, noting that these losses have been caused by unrealized mark-to-market losses on the company's investment portfolio.

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