American Capital Ltd. is the only private equity fund and the largest alternative asset management company in the S&P 500. American Capital, both directly and through its global asset management business, is an investor in management and employee buyouts, private equity buyouts, and early stage and mature private and public companies. It has $52 billion assets under management.
Year to date, the stock price has declined 9%. A steep downturn occurred toward the end of September, and the stock trades for $6.88 on Thursday, with a 52-week range of $5.98 - $10.85.
Paulson lifted shares of American Capital 5% when his firm announced it would buy a 13% stake in the company in April 2010. He got 43.7 million shares in a $295 million stock offering the company held to help it restructure its $2.4 billion of debt. The company had defaulted on its debt as the credit quality of its loan portfolio weakened during the recession.
Zacks Investment Research said on Sept. 16, 2011, that the company’s “successful restructuring of debt provided it with sufficient operating flexibility. Moreover, the company also continues to derisk its balance sheet through a number of initiatives including repayment of debt. However, we believe limited accessibility to capital and increased funding costs have weakened the company’s strategic position in its sector.”
American Capital has $1.8 billion of long-term liabilities and debt on its balance sheet and $302 million in cash. Revenue has been in decline since 2007, down from $697 million in 2009 to $600 million in 2010. Earnings increased from a loss of $910 million in 2009 to a positive $998 million in 2010. On Thursday, it received $49 million in debt and equity proceeds from its investment in Sixnet Holdings LLC.
The relatively small sells of his 18th largest holding have a minor effect on his $30 billion portfolio. He still owns 35,000,000 shares.
It’s not clear why he sold, but he may be facing redemptions in the near future. Investors have until October 31 to redeem their money from his largest funds. The New York Times reported that he told investors on an October 11 conference call that he had “made a mistake,” and would be reducing leverage and net exposure to the stock market.