UPDATE 1-American Capital to hold on to European unit

* Says no longer considering sale of European Capital

* Has agreed with lenders to restructure debt

* Pledges all assets as part of agreement

* To focus on exiting portfolio to retire debt

* Shares close up nearly 3 percent

By Archana Shankar

BANGALORE, Nov 4 (Reuters) - American Capital Ltd (ACAS.O) said it no longer plans to sell its European Capital unit, a day after the company managed to keep the lenders on its side by agreeing to get its debt restructured.

The struggling private-equity lender said it is working with the lenders to resolve defaults of European Capital, which had assets under management of $3.5 billion at the end of 2008 third quarter.

Closing conditions of the deal with lenders on American Capital's unsecured debt includes restructuring of European Capital borrowing facilities, Chief Executive Officer Malon Wilkus said.