American Capital Further Extends Debt Exchange Offer

(Reuters) – American Capital Ltd (ACAS.O) said it further extended its debt-exchange offer by a day to June 9, and only 14 percent of participating public noteholders have voted so far in favour of the offer.

However, the company said 100 percent holders of the company’s unsecured private notes support the plan.

Shares of the company rose as much as 16 percent to $5.02 Wednesday morning on Nasdaq. They pared some of the early gains and were up 10 percent at $4.79 in afternoon trade.

The fact that private noteholders and lenders support the restructuring plan is encouraging as hopes still remain for a workaround with public noteholders, BMO Capital Markets analyst David Chiaverini said.

“Even though the possibility of bankruptcy still exists, we continue to believe the odds favor ACAS completing this restructuring out of court,” Chiaverini said in a note to clients.

So far, bank loan lenders have not been informed of an imminent bankruptcy, sources at a bank loan group told Reuters.

The deadline can be extended until end June, but a failure to get the required votes by that time will leave American Capital with the only option of filing for bankruptcy, the sources said.

American Capital, a publicly traded private-equity firm and asset manager, is trying to restructure debt, but is having a hard time getting bondholders to sign an exchange offer.

It needs approval from 85 percent of public noteholders on terms for its proposed exchange offer.

Analyst Chiaverini said the 85 percent hurdle is not a “make or break” level, as the plan can still go through with the support of a majority of both private and public debt holders.

American Capital said 79.7 percent of public holders participated in the solicitation of votes for the standby plan, of which about 5.71 percent in principal amount and 14 percent in number of votes cast supported the plan.

The company did not immediately return calls seeking more details.

Wednesday’s extension of the exchange offer was the second in two weeks. On June 2, American Capital extended its debt-exchange offer to June 8.

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

Business development companies like American Capital have struggled to survive the economic downturn as the value of their portfolio companies, to which they make loans in return for equity stakes, has reduced. (Reporting by Anurag Kotoky in Bangalore; Editing by Gopakumar Warrier and Vinu Pilakkott)