On February 1, Prospect (Nasdaq: PSEC) filed with the SEC a preliminary proxy statement in opposition to the proposed merger between Allied and Ares. (For who these entities are, see my Wednesday entry).
They note on the basis of Allied's own filings that as of January 15, 2010, Allied had on hand approximately $185 million of cash, money market and similar securities. This represents the result of significant debt paydowns, and cash and equivalents on hand, and reduces the degree to whicht he entity that would result from a Prospect-Allied tramsaction would start its life in debt. It reduced, in more SEC-atuned terms, "the pro forma leverage of a Prospect-Allied combination."
Also, Allied is associated with a portfolio company, Callidus, and Prospect anticipates that it could further improve its post-merger cash situation by selling Callidus' assets.
Your conclusion then, John Barry? "We believe our pending increased merger proposal, if consummated, will deliver significant benefits to both Prospect and Allied shareholders, including potential upside through Allied’s equity positions in a strengthening economy, increased diversification across more than 130 portfolio companies, and amortization of certain fixed costs across a greater asset base.”
Showing posts with label Allied Capital. Show all posts
Showing posts with label Allied Capital. Show all posts
Sunday, February 7, 2010
Wednesday, February 3, 2010
Prospect Capital, Part One
Allied Capital Corp. plans to merge with Ares Capital Corp., and an interloper, Prospect Capital, has shown up at the wedding trying to disrupt the proceedings, like Benjamin at the end of The Graduate.
Said Prospect in a preliminary proxy statement filed January 26, 2010: "We believe that our increased merger proposal should not only provide superior value to Allied shareholders, when compared to the Ares proposal, but also should provide significant value to Prospect shareholders. In our view, the credit markets have improved significantly since October when Allied agreed to merge with Ares. We believe the significant improvement in the credit markets likely increases the value of the Allied portfolio since October and makes Allied asset sales and debt repayments more feasible. The strong GDP numbers released on January 29 further support our belief that there may be smoother sailing ahead for Allied's portfolio companies."
So what's this all about? Ares is a closed-end, non-diversified specialty finance company that is regulated as a Business Development Company, or a BDC, under the Investment Company Act of 1940. The company is publicly traded on the NASDAQ Global Select Market under ticker symbol “ARCC.” Ares Capital became a public company in October 2004 through an initial public offering, which raised approximately $160 million in net proceeds.
Allied Capital (Elaine, in my movie-driven analogy) is also a BDC -- one that manages private funds with total assets under management of $3.3 billion.
Allied had had a special meeting of stockholders scheduled for November 18, 2009, but it was cancelled in light of their deal with Ares. Allied will scheduled a new meeting "in connection with the proposed business combination" sometime within the first quarter of this year, we're told.
Prospect Capital, our Benjamin, is yet another BDC. It says that its "investment objective is to generate both current income and long-term capital appreciation through debt and equity investments." So it obviously distinguishes itself from all those companies with a business objective of losing money.
Now that I've gotten the participants straight, let me see if I can figure out for the next entry, on Sunday, what the dispute is.
Said Prospect in a preliminary proxy statement filed January 26, 2010: "We believe that our increased merger proposal should not only provide superior value to Allied shareholders, when compared to the Ares proposal, but also should provide significant value to Prospect shareholders. In our view, the credit markets have improved significantly since October when Allied agreed to merge with Ares. We believe the significant improvement in the credit markets likely increases the value of the Allied portfolio since October and makes Allied asset sales and debt repayments more feasible. The strong GDP numbers released on January 29 further support our belief that there may be smoother sailing ahead for Allied's portfolio companies."
So what's this all about? Ares is a closed-end, non-diversified specialty finance company that is regulated as a Business Development Company, or a BDC, under the Investment Company Act of 1940. The company is publicly traded on the NASDAQ Global Select Market under ticker symbol “ARCC.” Ares Capital became a public company in October 2004 through an initial public offering, which raised approximately $160 million in net proceeds.
Allied Capital (Elaine, in my movie-driven analogy) is also a BDC -- one that manages private funds with total assets under management of $3.3 billion.
Allied had had a special meeting of stockholders scheduled for November 18, 2009, but it was cancelled in light of their deal with Ares. Allied will scheduled a new meeting "in connection with the proposed business combination" sometime within the first quarter of this year, we're told.
Prospect Capital, our Benjamin, is yet another BDC. It says that its "investment objective is to generate both current income and long-term capital appreciation through debt and equity investments." So it obviously distinguishes itself from all those companies with a business objective of losing money.
Now that I've gotten the participants straight, let me see if I can figure out for the next entry, on Sunday, what the dispute is.
Wednesday, October 1, 2008
Three brief items
1. The credit crunch is having a predictable impact on merger and acquisition activity.
Still, a deal is a deal. Parties ought to be deterred from simply walking away when performance of their agreed-upon obligations has become onerous.
Vice Chancellor Stephen Lamb of the Delaware Chancery Court has refused to let Hexion Specialty Chemicals abandon its $6.5 billion buyout of Huntsman Corp.
Lamb's ruling came down Monday. "We are reviewing the decision and our options," said Hexion in a statement.
2. Ciena Capital has sought the protection of the bankruptcy courts. Ciena, a real estate lender, is 95% owned by Allied Capital, the bête noire of famed short seller David Einhorn.
Indeed, Einhorn wrote a book last year chiefly devoted to venting his frustrations at short selling Allied. He had begun making a public case for short selling, on the basus of the illiquidity of its portfolio, in the spring of 2002. Here's a link to an informative review of that book subscription required but free.
Short selling is all about timing. If you take a short position, you're betting not just that the stock will fall sometime, but that it will fall within the framework needed to make that position pay off. Einhorn's position in Allied over the period discussed inhis book was no diaster, but it proved no bonanza either.
No matter how badly the bankruptcy of Ciena may hurt Allied, then, it comes rather too late to vindicate views asserted in 2002. Though, let it be noted, Allied Capital stocks fell 14% yesterday, as general market indexes were rising.
3. Maurice Greenberg. A few days ago I would have saids that "Hank" Greenberg had given up on playing a continuing role at his old company, AIG.
He had filed a statement on September 25, after all, to the effect that he and entities under his control are selling 40 million shares of AIG stock. They took a big loss in doing so, too.
But AIG is being effectively nationalized, and its new Washingtonian masters want it to sell off assets.
This has created an opening for Greenberg to play a different sort of role. No longer as boss, no longer as quite so large a shareholder. But now he shows up as ... willing buyer.
Meanwhile the revolving door in from of the CEO office at AIG continues to twril. Greenberg sent his letter asking to be allowed to bid on the assets to ... Edward Libby. Who has been CEO for all of two weeks.
Still, a deal is a deal. Parties ought to be deterred from simply walking away when performance of their agreed-upon obligations has become onerous.
Vice Chancellor Stephen Lamb of the Delaware Chancery Court has refused to let Hexion Specialty Chemicals abandon its $6.5 billion buyout of Huntsman Corp.
Lamb's ruling came down Monday. "We are reviewing the decision and our options," said Hexion in a statement.
2. Ciena Capital has sought the protection of the bankruptcy courts. Ciena, a real estate lender, is 95% owned by Allied Capital, the bête noire of famed short seller David Einhorn.
Indeed, Einhorn wrote a book last year chiefly devoted to venting his frustrations at short selling Allied. He had begun making a public case for short selling, on the basus of the illiquidity of its portfolio, in the spring of 2002. Here's a link to an informative review of that book subscription required but free.
Short selling is all about timing. If you take a short position, you're betting not just that the stock will fall sometime, but that it will fall within the framework needed to make that position pay off. Einhorn's position in Allied over the period discussed inhis book was no diaster, but it proved no bonanza either.
No matter how badly the bankruptcy of Ciena may hurt Allied, then, it comes rather too late to vindicate views asserted in 2002. Though, let it be noted, Allied Capital stocks fell 14% yesterday, as general market indexes were rising.
3. Maurice Greenberg. A few days ago I would have saids that "Hank" Greenberg had given up on playing a continuing role at his old company, AIG.
He had filed a statement on September 25, after all, to the effect that he and entities under his control are selling 40 million shares of AIG stock. They took a big loss in doing so, too.
But AIG is being effectively nationalized, and its new Washingtonian masters want it to sell off assets.
This has created an opening for Greenberg to play a different sort of role. No longer as boss, no longer as quite so large a shareholder. But now he shows up as ... willing buyer.
Meanwhile the revolving door in from of the CEO office at AIG continues to twril. Greenberg sent his letter asking to be allowed to bid on the assets to ... Edward Libby. Who has been CEO for all of two weeks.
Wednesday, June 4, 2008
David Einhorn
I'd like to congratulate David Einhorn on writing a fascinating book. I've been reading through it quite quickly.
The book is "Fooling Some of the People All of the Time: A Long Short Story" published this year by John Wiley & Sons.
The central narrative thread of the book is Einhorn's effort to make money by short-selling the stock of Allied Capital. The subtitle, as you'll notice, is a subtle pun on the terms "long" and "short" as used in finance versus the same terms as used in publishing.
This book is 356 pages long even before the end matter, so it surely isn't a "short story" as publishers use the phrase. It is of course a story about trying to short stock.
The main narrative thread of "FSOTPAOTT" concerns Allied, and its dubious or fraudulent accounting. There are subplots, though, and there are preliminary materials with which Einhorn has to deal, such as the formation of his short-selling hedge fund, Greenlight Capital.
There's also this neat bit about Lanny Davis. Allied brought in Davis as an advisor on pubklic relations when Einhorn began going public, and going to the authorities, with his analyses of their books. Hiring Davis sounds a bit like bringing in the junkyard dog.
Davis, as former White House counsel to President Clinton, was in charge of the successful defense of the impeachment trial in the Senate. Some of his subsequent causes haven't been so successful, though. His private sector p-r clients have included at least three blatantly fraudulent operations: Seitel, a seismic data licensing company whose CEO received a five year prison sentence in 2002 (Lanny's spinning couldn't prevent that); Lernout & Hauspie, a speech-recognition technology company that unravelled as its multi-billion dollar fraud became public; and HealthSouth, an Alabama based health care service provider whose former CEO, Richard Scrushy, was convicted of bribery charges in June 2006.
Davis had better luck protecting Allied and its bosses from the fate of Messr Scrushy.
And he has in recent months repeatedly appeared on television as a surrogate for Presidential candidate Hillary Clinton. That gig appears to be at an end. I wonder who he'll work for next?
Either way, Einhorn has written a fascinating book.
The book is "Fooling Some of the People All of the Time: A Long Short Story" published this year by John Wiley & Sons.
The central narrative thread of the book is Einhorn's effort to make money by short-selling the stock of Allied Capital. The subtitle, as you'll notice, is a subtle pun on the terms "long" and "short" as used in finance versus the same terms as used in publishing.
This book is 356 pages long even before the end matter, so it surely isn't a "short story" as publishers use the phrase. It is of course a story about trying to short stock.
The main narrative thread of "FSOTPAOTT" concerns Allied, and its dubious or fraudulent accounting. There are subplots, though, and there are preliminary materials with which Einhorn has to deal, such as the formation of his short-selling hedge fund, Greenlight Capital.
There's also this neat bit about Lanny Davis. Allied brought in Davis as an advisor on pubklic relations when Einhorn began going public, and going to the authorities, with his analyses of their books. Hiring Davis sounds a bit like bringing in the junkyard dog.
Davis, as former White House counsel to President Clinton, was in charge of the successful defense of the impeachment trial in the Senate. Some of his subsequent causes haven't been so successful, though. His private sector p-r clients have included at least three blatantly fraudulent operations: Seitel, a seismic data licensing company whose CEO received a five year prison sentence in 2002 (Lanny's spinning couldn't prevent that); Lernout & Hauspie, a speech-recognition technology company that unravelled as its multi-billion dollar fraud became public; and HealthSouth, an Alabama based health care service provider whose former CEO, Richard Scrushy, was convicted of bribery charges in June 2006.
Davis had better luck protecting Allied and its bosses from the fate of Messr Scrushy.
And he has in recent months repeatedly appeared on television as a surrogate for Presidential candidate Hillary Clinton. That gig appears to be at an end. I wonder who he'll work for next?
Either way, Einhorn has written a fascinating book.
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