American Capital completes debt restructuring, retires $1.03 billion of debt

American Capital completes debt restructuring

BETHESDA, Md. — Private equity firm American Capital Ltd. said Monday it succeeded in restructuring $2.4 billion of debt.

The company said it reduced its total debt by $1.03 billion by restructuring its unsecured revolving line of credit facility and exchanging notes with note holders.

American Capital, whose largest shareholder is John Paulson’s hedge fund with a 12.9 percent stake, defaulted on its revolving line of credit, bonds and privately placed term notes last year as the credit quality of its loan portfolio deteriorated amid the recession. Under a restructuring deal reached with credit line lenders, American Capital will pay off the debt over four years.

Under the terms of the transaction, lenders and note holders had the option of receiving either cash or new secured debt in the full principal amount of their pre-transaction debt.

Holders of $1.03 billion of debt opted for cash, while lenders and note holders holding $1.31 billion of secured debt chose to receive new loans or notes.

At the close of the transaction, American Capital has $1.31 billion of secured debt, $11 million of unsecured debt and $1.61 billion of securitized debt. The company has about $240 million in cash.

European Capital Ltd., which is owned by American Capital, also restructured and retired part of its debt, the company said Monday.

In a statement, CEO Malon Wilkus looked ahead to an improving business climate.

“The merger and acquisition environment is beginning to perk up, with a growing number of attractive investment opportunities, while the banking industry continues to be highly restrictive in providing middle market growth and transaction financing,” he said. “As one of the largest sources of middle market and mezzanine finance, we intend to pursue the best opportunities in this attractive environment.”

Shares of American Capital gained 8 cents to $5.48 in afternoon trading.