DealZone

Can American Capital find a rich suitor?

More consolidation may be coming to the world of private equity lenders. Debt-laden Allied Capital solved its long-standing problems last week when it sold itself to Ares Capital. Rival American Capital, once an S&P 500 component but now struggling for survival, could be the next takeover target.

But some investors wonder if Allied got a raw deal. Ares paid $3.47 a share in stock for a company that had a book value of $7.49 in June. One law firm has already launched a “shareholder investigation“. Similarly, American Capital’s shares trade below $3, compared with a book value of $8.76 at the end of June.

Ares Capital is one of the rare healthy players in the field. It has a strong balance sheet and minimal liquidity concerns, and it has managed to pay a dividend throughout the worst U.S. recession since the Great Depression. For an Allied shareholder used to a continuous flow of bad news, swapping that stake for an investment in a healthy company must seem like a good move.

Like Allied, American Capital has suffered as the recession reduced the value of the companies it invested in. As a result, it’s gotten harder to sell them except at distressed prices. That value reduction is a big blow for a cash-starved company that has already defaulted on $2.3 billion of debt.

Both American Capital and Allied have sold portfolio companies at heavy discounts to their purchase prices. Now with equity markets sharply up from their doomsday-scenario lows in March, American Capital is on an aggressive selling spree. Recently it sold components distributor Imperial Supplies to W.W. Grainger and life sciences equipment maker Axygen BioScience to Corning.

Road to fortune or highway to hell?

GM-OPEL/That will ultimately be the question asked about what kind of a future the German carmaker Opel faces.

Parent General Motors said on Thursday that it indeed wanted
to sell a majority stake in the unit to Canadian auto parts
group Magna and Russia’s Sberbank, a decision long favoured by the German government under Chancellor Angela Merkel.

With about two weeks to go until a general election in
Europe’s biggest economy, this would clearly be a political
victory — but the question remains whether it will also be an
economic one.

from Funds Hub:

Hedge funds sniff out bond exchange bargains

Hedge funds may be sniffing around the growing mountain of troubled European companies, picking out those they see as most likely candidates to undertake bond exchanges as a way to make money, according to market talk.

rtr1vt6iDebt-laden Dutch NXP Semiconductors NXP this week managed to cut its debt by about $465 million in an example of a debt-swap restructuring deal that has been more common in the United States up until now.

This type of deal is expected to become more prevalent in Europe now, however, as a way to salvage firms with good business models but which have been saddled with too much debt.