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
(Reporting by Anurag Kotoky in Bangalore; Editing by Jarshad