American Capital agrees $2.4bn debt restructuring deal

The restructuring allows the firm to keep hold of subsidiary European Capital, which had been considered for sale.

The Nasdaq-listed group, which had $20bn under management as of September 2008, was badly hit by the recession. Bankruptcy fears surfaced earlier this year, with firm president Malon Wilkus admitting in May that the firm was in default of $2.3bn of debt. American Capital’s woes sent stock plummeting to a low of $0.58 a share in March this year compared to a high of $49.63 a share in January 2007.

In its second quarter results, the alternative asset manager reported an 87 per cent drop in operating income causing a net loss of $547m.

The near collapse of the firm followed a flurry of expansion at the peak of the 2008 financial bubble including the opening of a Hong Kong office and second Boston office. In November 2008, it was forced to delist its European Subsidiary after its share price plummeted, followed in December by a decision to cut 19 per cent of its global workforce - around 110 positions. In September this year, the firm shuttered its Frankfurt office.

Wilkus said, “We are pleased to reach this step and believe that the terms provide a basis for a complete restructuring of our $2.4bn of unsecured debt. While the process is not yet complete, we are optimistic that it will soon conclude favourably and we can turn our focus to rebuilding shareholder value."

American Capital stock closed at $2.78 per share yesterday.

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