Monday, October 25, 2010

American Capital NASDAQ: ACAS

American Capital (stock price of 6.57 as of 10/25/2010) will be the first BDC that I am reviewing. They are one of the oldest and largest of the BDCs. Of note, they are also in a form of zombie status due to certain issues that arose during the financial crisis starting in 2008. Most of the material presented below was taken from the company's webpage, SEC filings and news articles found on Google.

Directly lifted from the webpage - American Capital (Nasdaq:ACAS), with $15 billion in capital resources under management, is a publicly traded private equity firm and global asset manager. American Capital, both directly and through its global asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate and structured products. American Capital and its affiliates invest from $5 million to $100 million per company in North America and €5 million to €25 million per company in Europe. 

The company is headquartered in Bethesda, Maryland and has offices in Boston, Chicago, Dallas, New York in the US and international offices in Hong Kong, London and Paris. Judging by headcount, it appears the main offices in the US are its headquarters and the Dallas office. The company used to have a Pittsburgh office, but that office appears to have been closed over the summer in 2000. Also, it appears that office in Los Angeles and Philadelphia were also closed sometime within the past two years. It was founded in 1986 and taken public in August 1997. The IPO consisted of 7 million shares, up to 645,161 shares offered to the directors, officers and other employees of the company and up to 364,606 shares issued as warrants to the underwriters. An interesting note is that the company currently has over 340million shares outstanding The managers who took the company public (as per the Form N-2) were David Gladstone, Malon Wilkus and Adam Blumenthal. The company had a very successful run up until the end of 2008 when the company's stock price was crushed due to portfolio markdowns that triggered various credit events. If someone was fortunate enough to get out at that time, they would have recognized a Total Return of about 200%. Just in case you were curious, Total Return is equal to the actual rate of return of an investment over a given period of time including interest, capital gains, dividends and any distributions.

Originally this post was going to discuss the investments, management, loan issues (zombie company) and other major factors, but as I was writing them up, I realized it was a small novel to complete all of that information. So, I will space out the posts and add more meat to each section. The first section I will cover is the ACAS Investment mix and changing strategies. The firm's portfolio has changed quite substantially since the IPO in '97, so there will be some interesting charts.

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