UPDATE 3-ACAS may pay bondholders up to $100 mln-Stifel's Mason

Fri Jun 4, 2010 5:08pm EDT

* Stifel says management may give in to creditors' demands

* Stifel says bondholders demanding "make-whole" payment

* Moody's says may cut debt rating

* Moody's says bankruptcy risk rises

* Stock closes down 3 pct (Recasts; adds analyst comments)

By Anurag Kotoky

BANGALORE, June 4 (Reuters) -American Capital Ltd's (ACAS.O) risk of bankruptcy has reduced and the company's management is likely to give in to public bondholders' demands of a "make-whole" payment, an analyst at Stifel Nicolaus said.

Analyst Greg Mason said the company may satisfy bondholders by making a payment of $75 million to $100 million.

"In our mind, we would expect that ACAS will ultimately write that check to bondholders before they file chapter 11," Mason told Reuters. His position represents a change from Thursday, when he downgraded the stock to "sell," saying that debt-laden American Capital may file for bankruptcy based on the disappointing outcome of a bondholder vote on debt restructuring. [ID:nSGE6520FN]

On June 2, American Capital extended its debt-exchange offer to June 8. It needs approval from at least 85 percent of public noteholders to go ahead with the debt restructuring plan.

As of June 2, the company had approval of only seven percent of note holders for the restructuring plan.

Earlier in the day, Moody's Investors Service said it may downgrade American Capital' debt, as the company is more likely to file for restructuring through bankruptcy.

"In the event of bankruptcy, ACAS would likely be downgraded one to two notches given Moody's belief that the recovery for bondholders would be high due to the company's substantial equity base," the rating agency said Friday.

In regulatory filings, the company had said that it may file for bankruptcy if it fails to restructure $2.5 billion of debt.

Business development companies like American Capital have struggled as the biggest economic downturn since the Great Depression reduced the value of their portfolio companies, to which they make loans in return for equity stakes.

American Capital shares closed down more than 3 percent at $4.65 on Nasdaq, after touching a low of $4.50. (Reporting by Anurag Kotoky in Bangalore; Editing by Gopakumar Warrier)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.