Source: Company Press Release
 
American Capital ("ACAS" or the "Company") (Nasdaq: ACAS) announced net operating income ("NOI") for the quarter ended March 31, 2009 of $64 million, or $0.31 per diluted share. Earnings (loss) less appreciation and depreciation ("Realized (Loss) Earnings") for the quarter was $(55) million, or $(0.27) per diluted share. For the quarter ended March 31, 2009, there was a net loss of $(547) million, or $(2.65) per diluted share.
 
Q1 2009 FINANCIAL HIGHLIGHTS
 
    --  $64 million of NOI
    --  $(131) million net realized loss on investments
    --  $79 million of realizations
    --  $12.32 net asset value ("NAV") per share
 
FINANCING UPDATE AND COVENANT BREACHES
 
The Company remains in default on $2.3 billion of unsecured credit arrangements outstanding as of March 31, 2009. The Company was able to reduce its outstanding debt by $51 million during the quarter ended March 31, 2009.
 
"We have continued to work with our lenders to reach a resolution of our defaults," said John Erickson, Chief Financial Officer. "Once we reported the defaults in March, we engaged Miller Buckfire & Co. LLC, a leading restructuring advisory firm, to represent us in the negotiations. Our lenders have also engaged financial and legal advisors and we are required to reimburse them for this expense. We are also paying higher interest rates due to the defaults and credit downgrades so, unfortunately, we will see an increase in our expenses until we reach a resolution. In the quarter, we also retired $20 million of debt in one of our securitizations by purchasing one AA rated bond for $3 million, (or 18% of its face value), which resulted in a gain of $17 million. With our current restructuring discussions underway, we are unlikely to purchase more debt in the market until we reach an overall resolution of our defaults."
 
Asset value declines have also caused the Company to continue to be below the 200% asset coverage ratio set forth in the Investment Company Act of 1940, which generally restricts the Company from issuing any new debt except to refinance existing debt. This does not restrict the use of cash from operations, allowing the reinvestment of proceeds from realizations of portfolio exits. The Company believes that it has sufficient liquidity to meet its currently scheduled debt amortization and the investment needs within its portfolio.
 
"At our Annual Meeting on June 11, we are asking our stockholders to approve a charter amendment allowing up to four reverse stock splits over the next year," noted Sam Flax, Executive Vice President and General Counsel. "Our Board of Directors may determine a reverse stock split is in the Company's best interests if, among other factors, our continued stock exchange listing is in doubt. If we do complete a reverse split, it will automatically adjust the authority our stockholders granted us in February to sell a limited number of shares below net asset value and, while SEC approval will be required, we hope for an appropriate adjustment to the strike price of our options and the number of shares for which the options would be exercised."
 
"During the quarter we completed the purchase of the remaining outstanding shares of our portfolio company European Capital," said Tom McHale, Senior Vice President, Finance. "We had expected to value our investment in European Capital at its NAV as a result of this purchase, but European Capital breached some of its debt covenants in the quarter. Although its lenders have agreed to forbear for a period of time, the existing defaults could prevent our realization of NAV. Miller Buckfire & Co. LLC has also been engaged to assist in restructuring the credit of European Capital and Citigroup Global Markets Inc. has been engaged to advise on strategic alternatives. If European Capital successfully restructures its debt, this may result in appreciation of American Capital's investment in European Capital."