ACAS - American Capital

[thepupil]

a little weak of a hit piece in my view. nothing really new if you've been following with the exceptions on the specifics of the UK blind company and that 2 yr 10X...those look egregious.

 

- PE portfolio has always had a giant question mark on it. they've been able to sell things at their mark for a while but we may be reaching the point at which all the saleable assets are gone and the steamiest of shit is left

 

- people have been complaining about the ACE III transaction on ACAS message boards ever since it happened and the companies starting getting sold

 

-ACAM stock comp is no secret and not sustainable. if it is, I agree w/ FultonView. 

 

maybe i'm an idiot, but I've openly acknowledged this company's shittiness and still found it to be compelling. A blog post illustrating the shittiness isn't changing my view.

 

We'll see.

 

EDIT:

 

At the risk of sounding like a chinese reverse merger shareholder, I think a certain amount of sliminess is prices in.

 

That being said, I did already own Jan 17 $10 puts as a hedge to disaster (though the disaster in my head was a credit crisis or an mREIT blowup, not really an all out acctg fraud, knew there was some of that, but the individual examples provided are worse than i thought). Those puts are still available for 60 cents, not expensive.

 

In response to the report I sold Jan '18 $17.00 calls for $1.40. This gives me a good bit of premium upfront and derisks substantially without giving away much upside, particularly if ACAS is sold and all time value goes away.

 

This is my wishy washy response to the report. Maintain the disaster hedge in place and take a little upside off the table.

 

 

 

 

[thepupil]

http://seekingalpha.com/article/3747076-texas-regulatory-filings-mystery-compensation-call-into-question-american-capitals-internal-controls-and-managements-integrity

 

more fun today...it's funny...based on the comments on VIC and my own thoughts (though i did take some risk off the table with the call sales)...the reaction to this has been kind of "myeh, we knew they were sketch"...

 

low valuation and very low expectations have helped insulate ACAS from this (for now), whereas in situations where management is very highly regarded and stock is very expensive, any warts or suspicions of warts can collapse the stock quickly. perhaps that is my own bizarre rationalization of investing alongside the sleaze that is ACAS (and Tetragon), but just curious if anyone else had any thoughts.

[Jurgis]

low valuation and very low expectations have helped insulate ACAS from this (for now)

 

"for now" is the key word. You risk that they do something very sleazy (bad, fraudulent, etc.) and the market still dumps it.

 

Disclosure: no position, no interest in ACAS.

[thepupil]

http://finance.yahoo.com/news/american-capital-concludes-initial-phase-233000598.html

 

company/parts of company officially for sale

 

have personally been trimming that which I added in the $12's as ACAS holds together while other things fall apart and credit continues to deteriorate...

 

even though they sold most of their liquid loans in Q4 and a nice portion of their CLO equity, I would think NAV has probably taken a bit of a hit w/ all the noise in credit/loans, even after repurchases.

[Guest MarkS]

Here is an article that might be of interest.  Does Blackrock's large purchase change opinions.

http://bdcreporter.com/2016/01/in-the-filings-american-capital-acas-buyers-and-sellers/

Thanks

Mark

[doughishere]

http://www.betteracas.com/content/uploads/2015/11/ACAS_Presentation_2015-11-15.pdf

[doughishere]

Pine River CApital 5%

 

http://www.sec.gov/Archives/edgar/data/817473/000128813616000083/ACAS_20160210.txt

[thepupil]

FWIW, I sold my ACAS  throughout January and my last shares yesterday because I think there are better/cheaper things out there.

 

certainly not a great trade from start of thread...personally got lucky on aggressive adds in late september which made the position moderately profitable overall, perhaps a victory given it's a slimy BDC/alt. asset manager in a market that has severely punished everything that fits that description.

[thepupil]

http://fultonviewresearch.blogspot.com/

 

He or she isn't a fan of the way the assets are marked.

 

http://www.marketwired.com/press-release/enercare-signs-agreement-acquire-service-experts-a-leading-north-american-provider-hvac-tsx-eci-2103594.htm

 

ACAS just sold what was considered the poster child of sktechy marks for what appears to be a price well above their mark and 20X+ what they paid (not sure of that, because don't know exact cap structure but according to short report they bought it for $15MM and according to press release they just sold it for $340MM, about 4X what the short sellers said it was worth.

[thepupil]

American Capital Receives $64.9 Million from Sale of CMBS Portfolio

PR Newswire

 

BETHESDA, Md., March 21, 2016

 

BETHESDA, Md., March 21, 2016 /PRNewswire/ -- American Capital, Ltd. (Nasdaq: ACAS) ("American Capital" or the "Company") announced today that it has completed the sale of its portfolio of commercial mortgage backed securities ("CMBS") bonds and related fee agreements and select collateral administration rights (the "Transaction") to a group of unaffiliated third parties.  American Capital received net cash proceeds of $64.9 million, subject to post-closing adjustments.  The assets included in the Transaction had a fair value of approximately $40.4 million as of December 31, 2015, after incorporating post December 31, 2015 adjustments. 

 

1.6X book for the CMBS, an area where ACAS has done poorly. they continue to liquidate at prices at or above book.

[thepupil]

ACAS bought 8.8% of shares back in Q1 2016 after buying back 8.0% in Q4 2015. they bought back at an average price that is low 70's as a % of fully diluted NAV.  have bought back a total of 46% of shares since the program started in 2011.

 

 

https://finance.yahoo.com/news/american-capital-announces-repurchase-21-143000766.html

 

BETHESDA, Md., April 1, 2016 /PRNewswire/ -- American Capital, Ltd. (ACAS) ("American Capital" or the "Company") announced today that in the first quarter of 2016 it made open market purchases of approximately 21.2 million shares of American Capital common stock, or 8.8% of the Company's outstanding shares as of December 31, 2015, under its stock buyback program (the "Program").  The shares were purchased at an average price of $13.96 per share, totaling approximately $296.5 million.

 

On November 25, 2015, American Capital announced that its Board of Directors revised and expanded the Program by increasing it to a range of $600 million to $1 billion from the prior range of $300 million to $600 million.  Under the Program, purchases will only be made at per share prices below 85% of the Company's net asset value per share as of September 30, 2015 and will be subject to certain other conditions.  On December 7, 2015, the Company announced that it had entered into a Rule10b5-1 trading plan to undertake accretive share repurchases up to the limits of the Program.  The Company has purchased a total of $730 million under this program and expects to complete the Program by June 30, 2016.

 

Since American Capital began stock buybacks in August 2011 through December 31, 2015, American Capital made open market purchases of 159.7 million shares or 46% of shares outstanding as of June 30, 2011, for an aggregate of $2.0 billion, of American Capital common stock at an average price of $12.62 per share.

[doughishere]

That's just stupid crazy 46%

[thepupil]

well a large portion of that has been offsetting dilution from options struck at very generous prices, and it's not that crazy when you  that most BDC's distribute 8-10% or whatever in the form of dividends, but for all the narrative about these guys not caring about shareholders or mismarking assets, they have sold a ton of assets at 1X NAV and above and have bought a lot of shares below NAV, so they have that going for them.

[thepupil]

http://fultonviewresearch.blogspot.com/

 

He or she isn't a fan of the way the assets are marked.

 

http://www.marketwired.com/press-release/enercare-signs-agreement-acquire-service-experts-a-leading-north-american-provider-hvac-tsx-eci-2103594.htm

 

ACAS just sold what was considered the poster child of sktechy marks for what appears to be a price well above their mark and 20X+ what they paid (not sure of that, because don't know exact cap structure but according to short report they bought it for $15MM and according to press release they just sold it for $340MM, about 4X what the short sellers said it was worth.

 

 

Looks like it was an 18X profit now realized.

 

ACAS:          1

Shortseller:  0

 

 

American Capital Receives $244 Million from Sale of Portfolio Company Service Experts and Generates a 184% Return on Its Investment

PR Newswire American Capital, Ltd.

14 minutes ago

 

    

 

BETHESDA, Md., May 11, 2016 /PRNewswire/ -- American Capital, Ltd. (ACAS) ("American Capital") announced today that its portfolio company SEHAC Holdings Corporation (together with its subsidiaries, "Service Experts" or the "Company") has merged with a subsidiary of Enercare Solutions Inc., a wholly-owned subsidiary of Enercare Inc. (ECI.TO), one of Canada's largest home and commercial services companies.  The total cash consideration is $340.75 million, subject to customary working capital and other post-closing adjustments.  American Capital received $244 million in proceeds, including fees and assuming full collection of escrow and other holdback amounts, and realized a capital gain of $225 million from the transaction.  Over the life of the investment, American Capital realized 18 times its investment in the Company and generated a compounded annual rate of return of 184%, including interest, dividends, fees and realized gains.

 

American Capital acquired Service Experts in a One Stop Buyout® in March 2013 (for more information, click here).  Headquartered in Plano, TX, Service Experts is a leading provider of sales, installation, maintenance and repair of HVAC systems for the residential and commercial markets, operating 90 branch locations across the United States and Canada with approximately 2,800 employees and $435 million in annual sales.

 

"Since our investment three years ago, Service Experts has thrived under the leadership of Scott Boxer, President & CEO.  The Company achieved significant growth as a result of its focus on customer service and the completion of multiple strategic acquisitions, which collectively expanded its geographical presence and service offering, and boosted revenues.  We are proud to have been a part of Service Experts' success," said Myung Yi, Managing Director, American Capital Special Situations. 

 

Anuj Khanna, Principal, American Capital Special Situations, said, "The tremendous success of our investment in Service Experts is a result of the tireless effort and commitment of the Company's executive leadership team and the approximately 2,800 employees across the United States and Canada, in conjunction with the financial, operational and strategic capabilities of American Capital Special Situations.  Together, we have made significant and permanent improvements to the business, while returning the Company to prominence within the HVAC industry.  We believe Enercare is well positioned to enhance the Company's future prospects, and we wish them all the best in this endeavor."

 

"As our partnership with American Capital Special Situations comes to a close, I would like to thank the team for its unwavering support of Service Experts over the past three years.  The team's strategic guidance and hands-on approach to managing the investment have been a tremendous asset to the organization.  Moreover, I would like to recognize our key supply partners, including Lennox International, Inc., for their outstanding service and support of Service Experts.  We look forward to beginning our partnership with Enercare and building one of the leading home and commercial services companies in North America," said, Scott Boxer, President & CEO of Service Experts.

 

Moelis & Company LLC acted as financial advisor to Service Experts in connection with the transaction, while Arnold & Porter LLP served as M&A counsel and Osler, Hoskin & Harcourt LLP served as Canadian counsel.

[thepupil]

https://finance.yahoo.com/news/ares-capital-corporation-acquire-american-115000393.html

 

Selling AGNC external management contract to AGNC for $2.45 in cash

Selling ACAS for $6.41 per share in cash  & 0.483 Ares Shares ($7.34) + 1.20 from Ares management

 

Total consideration: $17.40

 

Overall, ACAS was a mediocre investment from start of thread, but the volatility allowed for some very good entry points and it generally outperformed BDC's, traditional asset managers, and particularly alternative asset managers.

 

Like Allied Capital, ACAS gets swallowed up by ARCC at a discount, albeit ACAS is less scummy than ALD, so it got a better P/B

[doughishere]

https://finance.yahoo.com/news/ares-capital-corporation-acquire-american-115000393.html

 

Selling AGNC external management contract to AGNC for $2.45 in cash

Selling ACAS for $6.41 per share in cash  & 0.483 Ares Shares ($7.34)

 

Total consideration: $17.40

 

Overall, ACAS was a mediocre investment from start of thread, but the volatility allowed for some very good entry points and it generally outperformed BDC's, traditional asset managers, and particularly alternative asset managers.

 

Like Allied Capital, ACAS gets swallowed up by ARCC at a discount, albeit ACAS is less scummy than ALD, so it got a better P/B

 

Yeah, to be honest I stayed out of it...It was too much of a black box....I have a feeling that I ran the company and seen the books it would have been much more comfortable but I just couldn't mark its positions.

 

Its been fun ACAS.

[krazeenyc]

I see the $17.40 in the press release.... 

but my math skills are failing me:

 

$2.45 + $6.41 + $7.34 = $16.20 no?

 

what am i missing?

[thepupil]

I see the $17.40 in the press release.... 

but my math skills are failing me:

 

$2.45 + $6.41 + $7.34 = $16.20 no?

 

what am i missing?

 

$1.20 from ares management to ACAS shareholders. I missed it too at first.

[insight]

http://www.prnewswire.com/news-releases/ares-capital-corporation-to-acquire-american-capital-ltd-in-transaction-valued-at-34-billion-300272922.html

 

"As part of the aggregate consideration, Ares Management, L.P. (NYSE: ARES) will provide financial support to the transaction.  Through its subsidiary, Ares Capital Management LLC, which serves as the investment adviser to Ares Capital, Ares Management will provide $275 million of cash, or $1.20 per fully diluted share, to American Capital shareholders at closing."

[krazeenyc]

I see the $17.40 in the press release.... 

but my math skills are failing me:

 

$2.45 + $6.41 + $7.34 = $16.20 no?

 

what am i missing?

 

$1.20 from ares management to ACAS shareholders. I missed it too at first.

 

I had originally just read your post. After fully reading the press release I see that as well.

[doughishere]

Elliott is going to be pissed. Watch....

[thepupil]

Elliott is going to be pissed. Watch....

 

 

Elliott Management, holder of a 14.4% interest in American Capital, strongly supports the transactions and will vote its shares in favor at the upcoming Special Meeting. Portfolio Managers Jesse Cohn and Pat Frayne said in a statement, “We are pleased with the result of the Strategic Review and thank the Independent Board Committee of ACAS for its hard work and success in delivering an excellent outcome for shareholders. We believe this transaction represents the best path forward for ACAS shareholders and creates a tremendous opportunity for value creation as shareholders of Ares Capital after the deal is completed. ACAS’s streamlined portfolio will benefit from management by an Ares team that has a stellar track record of delivering shareholder value.”