Allied Capital records 7th straight quarterly loss

By Thomas Heath
Washington Post Staff Writer
Friday, November 6, 2009

Allied Capital reported a third-quarter loss of $140.7 million (79 cents a share) as the publicly traded investment firm took a $117 million expense to restructure its debt in a tight borrowing climate.

The results compared with a loss of $318.3 million ($1.78 per share) for the same period last year, when Allied wrote down the value of its investments in a contracting economy.

The results marked the seventh straight quarterly loss for Washington-based Allied, which announced last month that it would be acquired by Ares Capital of New York for $648 million in an all-stock deal.

The acquisition is expected to close in the first quarter of 2010. The company said it would set a date for a special meeting to seek shareholder approval of the sale to Ares.

The company's third-quarter net investment income declined 79 percent from the same period a year ago, to $9.6 million. Assets declined 39 percent from a year ago, to $2.84 billion.

"Most of the loss from the third quarter of 2008 was driven by a write-down of assets," said analyst Scott Valentin of FBR Capital Markets. "This quarter, you had only a $28 million write-down of assets, which means asset values seem to be stabilizing, unfortunately at a very low level. But Allied had a $117 million charge on renegotiating its debt, so that was a big expense."

Allied is a business-development company that operates like a private equity firm. It invests in and helps grow and manage, small and mid-size businesses. It receives tax advantages from the federal government in return for paying most of its profits to shareholders in the form of dividends.

Allied canceled its dividend earlier this year as it sought to preserve capital.

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