Allied Capital 1Q tops views; debt weighs on stock

Allied Capital, which provides financing for buyouts, acquisitions and other business transactions, on Monday said its first-quarter loss ballooned to more than eight times its loss a year earlier.

For the three months ended March 31, Allied Capital lost $347.7 million, or $1.95 per share, compared with a loss of $40.7 million, or 25 cents per share, in the 2008 first quarter.

Income from interest and dividends fell 34 percent to $88.7 million, from $134.7 million last year. Income from fees and other sources dropped 37 percent, to $6.5 million, from $10.3 million.

After expenses, net investment income, or what Wall Street refers to as "core income," came to 16 cents per share. Analysts polled by Thomson Reuters expected net investment income of 13 cents per share.

Allied Capital said it focused its efforts during the quarter on selling assets in its portfolio in order to generate capital to improve its liquidity and de-lever its balance sheet. It suspended its dividend, and continues to expect no dividend through the end of the year. During the quarter, it sold or had repayments on investments that generated proceeds of $241.8 million.

The company remains in default related to certain covenants on its revolving line of credit and private notes because its asset coverage ratio stood at 171 percent as of March 31. The debt covenants require a ratio of no less than 200 percent. Allied Capital said it is in discussions with those lenders and noteholders and hopes to restructure those debt agreements. "There can be no assurance that the company will achieve a comprehensive restructuring," the company said.

Allied Capital shares fell in afternoon trading, losing 20 cents, or 5.8 percent, to $3.25 on heavy volume. The stock has ranged from 58 cents to $21.99 in the past 52 weeks.