Allied Capital, a publicly listed private equity firm, has defaulted on about $1.2 billion of debt and could be forced by its lenders to immediately repay the debt in full.
In a filing with the US Securities and Exchange Commission, Allied said the default on a $170 million revolving credit facility had been triggered after the company failed to complete necessary documents that were part of an amendment to the firm’s credit facility reached on 30 December.
The revolver default triggered a default on about $1 billion in outstanding private notes, Allied said.
The company said that none of the parties have moved to accelerate payment of the debt obligations at this point. The default allows the lenders, which include Bank of America, and 51 percent of the noteholders to accelerate repayment of all amounts owed “and to require the company to provide cash collateral equal to the face amount of all outstanding letters of credit”, Allied said.
The default “restricts the company from borrowing or obtaining letters of credit under its revolving credit facility, and from declaring dividends or other distributions to shareholders”, Allied said.
The company continues to discuss amendments and other relief with the lenders, Allied said, and “in light of the current market environment, the company has expanded the discussions to encompass a more comprehensive restructuring of these debt agreements to provide additional flexibility”.
Allied was affected by the recession when its portfolio company, real estate lender Ciena Capital, collapsed into bankruptcy in September. At the time, Allied said it expected to record a “substantial” write down on its investment in the company.
Allied Capital, based in Washington DC, has more than $4 billion in assets. The company has invested in more than 100 companies with more than $12 billion in revenue. The company went public in 1960 and manages private funds focused on mid-market investments with committed capital totaling $4.9 billion.