Dec 31 Buyout firm Allied Capital Corp (ALD.N) said it amended certain terms under its revolving credit facility and private notes, reducing its capital maintenance covenant to more than $1.5 billion and 85 percent of consolidated adjusted debt.
The amendments will require the company to limit the payment of dividends to a maximum of 20 cents a share per quarter, the company said.
Shares of Allied Capital rose as much 17 percent in early morning trade Wednesday.
The revolving credit facility and the private notes will also limit the company's ability to declare dividends if it defaults under certain provisions, Allied said in a statement.
Allied Capital declared a quarterly dividend of 65 cents a share in November, but said it was reviewing its dividend strategy for 2009, and expects to reduce it to its net investment income levels.
The company warned in November that it might breach the minimum net-worth covenant in its credit agreements if the value of its their portfolios continue to decline.
Allied Capital, which currently has a covenant on a Bank of America credit facility, said last month it would work with its lenders over the next several weeks and try to negotiate an amendment should the situation worsen.
"The amendments increase the rate of interest borne by the private notes by 100 basis points, and increase the applicable spread on any borrowings made and fee on any letters of credit issued pursuant to the revolving credit facility by 100 basis points," Allied said.
Additionally, the amendments required a 50 basis point amendment fee, the company said.
Business development firms like Allied and larger rival American Capital Strategies Ltd (ACAS.O), which usually make loans to small businesses in return of equity stakes, have seen their investment portfolio deplete and raising capital increasingly difficult amid the financial crisis.
Shares of the Washington-based Allied Capital were trading up 14 cents at $2.66. They earlier touched a high of $2.95, making it one of the biggest percentage gainers on the New York Stock Exchange. They have fallen 88 percent so far this year through Tuesday. (Reporting by Anurag Kotoky in Bangalore; Editing by Jarshad Kakkrakandy)
Our top photos from the last 24 hours.