Thursday, February 19, 2009

Victory for Einhorn: Allied Capital In Default

After seemingly endless years of wrangling back and forth, Einhorn has finally been vindicated: Allied Capital announced in an 8K today that it was notified by its lenders of a default in its credit facility, an event which will severely hamper the company's liquidity, and is the first step on the road to Allied's utter annihilation. From the 8K:

The administrative agent for the revolving credit facility has notified the Company that an event of default has occurred pursuant to the revolving credit facility. An event of default under the revolving credit facility constitutes an event of default under the private notes.
Neither the lenders nor the noteholders have accelerated repayment of the Company’s obligations; however, the occurrence of an event of default permits the administrative agent for the lenders under the revolving credit facility, or the holders of more than 51% of the commitments under the revolving credit facility, to accelerate repayment of all amounts due, to terminate commitments thereunder, and to require the Company to provide cash collateral equal to the face amount of all outstanding letters of credit. Pursuant to the terms of the private notes, the occurrence of an event of default permits the holders of 51% or more of any issue of outstanding private notes to accelerate repayment of all amounts due thereunder. Acceleration of the amounts outstanding under the revolving credit facility or any issue of the private notes could have a material adverse impact on the Company’s liquidity, financial condition and/or results of operations.

The existence of an event of default restricts the Company from borrowing or obtaining letters of credit under its revolving credit facility, and from declaring dividends or other distributions to its shareholders.
One could construe this as a rather ominous sign to other BDCs including American Capital and Apollo Mezzanine.
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Nick said...

Personally I think Einhorn won when Ciena (aka BLE) went Chapter 11 and ALD dropped from $15 to $5 in two weeks (Oct 08).

If you read FSOTPAOTT:ALSS you will come out loathing ALD with a passion, owing to their crooked, lying management team while despairing at the horrific behaviour of the SEC. Which investigated Einhorn instead of ALD.

Where are the tax-payer clawbacks for Willy Walton's $11m 2007 comp (in total >$30m 03-07)? I wonder how much he will pay himself for 2008 when the stock fell 88%.
Please note stock related comp in 07 was <5%.

Fair disclosure: I love Einhorn. He's the man.

Anonymous said...

Yup. Everytime I hear Markopolous/Madoff mentioned I think of Einhorn and ALD. It's nice to see there is some justice in the world.

Anonymous said...

Einhorn didn't win a thing. He's losing money at an incredible rate for his clients. He didn't create the credit crunch that is killing Allied (and all BDCs), or even predict it.