Fitch Rates Allied Capital Corp. 'BBB'; Outlook Stable.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch rates Allied Capital Corp. (Allied) as follows: --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) 'BBB'; --Senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. 'BBB'. The Ratings Outlook is Stable. Total rated unsecured debt is $1.9 billion. Allied's rating reflects the company's well-defined operating strategy, solid historical operating performance and asset quality, low leverage and strong risk adjusted capitalization. Rating concerns center on Allied's investment concentrations, reliance on access to capital markets to fund growth, and heightened competition in Allied's core private finance business from other business development companies (BDC's), hedge funds, and other financial institutions. Historically, Allied has reported strong profitability due to high investment yields from debt investments coupled with relatively low interest costs due to modest leverage. Overall asset quality is solid. However, relative to other finance companies, non-accruing loans tend to represent a larger component of its investment portfolio because of Allied's emphasis on mezzanine lending and have historically ranged from 4.0% to 6.0% of the total portfolio. As a BDC (Backup Domain Controller) In a Windows NT server, a copy of the Primary Domain Controller (PDC). The BDC is periodically synchronized with the PDC. See PDC. BDC - Backup Domain Controller , Allied does not report net charge-offs. Instead, the portfolio is valued on a mark-to fair value basis each quarter. The company employs third party valuation firms to assist in validating the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of the portfolio. As a BDC, the company is required to maintain leverage below 1.0 times (x), and Allied intends to maintain leverage between 0.5x - 0.7x. Fitch is comfortable with this range. Allied is the only major BDC with a fully unsecured funding profile. The company typically uses its $922.5 million committed revolving bank facility to fund new investments. To date, the company has primarily accessed the unsecured private placement and equity markets to refinance the bank borrowings. The unsecured private placement debt is held by institutional investors, primarily insurance companies, and typically has five or seven year terms with fixed rates of interest. Regulated Investment Company Regulated investment company An investment company allowed to pass capital gains, dividends, and interest earned on fund investments directly to its shareholders so that it is taxed only at the personal level, and double taxation is avoided. requirements mandate that Allied dividend 90% of its annual ordinary income to shareholders, is also a concern. This requirement does not allow Allied to retain a significant amount of capital and combined with the 1.0x leverage requirement periodically requires Allied to raise equity via the public equity market to fund growth. Historically, the company has demonstrated its ability to access the public equity market by raising approximately $952 million via common stock offerings from 2001 through 2004. The company did not raise any equity capital during 2005. Also, Allied currently expects that its annual taxable income Under the federal tax law, gross income reduced by adjustments and allowable deductions. It is the income against which tax rates are applied to compute an individual or entity's tax liability. The essence of taxable income is the accrual of some gain, profit, or benefit to a taxpayer. for 2006 will exceed dividends to shareholders and the company will carry over excess taxable income for distribution to shareholders in 2007. Though the company has to pay an excise tax of 4% on this spillover spill·o·ver n. 1. The act or an instance of spilling over. 2. An amount or quantity spilled over. 3. A side effect arising from or as if from an unpredicted source: income, this represents a source of capital as Allied is not required to make the distribution until the following year. It also provides some cushion with respect to maintaining dividends and flexibility concerning the timing of any issuance of debt or equity and the funding of asset growth. Fitch remains concerned with the uncertain outcome of the current Securities and Exchange Commission and Department of Justice investigations. Allied's management has asserted that they do not anticipate that the outcome of these investigations will have a material impact on the company's financial position or operations. Therefore, ratings may be impacted negatively should management's current assertion change or if the outcome of these investigations does materially impair Allied's financial condition or operations. Headquartered in Washington D.C., Allied Capital Corporation is a specialty finance company that provides long-term debt and equity capital to middle market companies. The company was formed in 1997 through the merger of five predecessor companies and operates as a regulated Business Development Company. Allied predecessor companies trace their roots back to 1958. Allied currently has over $4 billion in total assets and is listed on the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under the symbol ALD ALD abbr. adrenoleukodystrophy ALD, n.pr See adrenoleukodystrophy. ALD aldolase. . Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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