What's Up With American Capital's "Acceleration"?
American Capital's private noteholders have "accelerated" on the firm, which means they basically demanded their money. The troubled lender/buyout firm has been in default of one of its credit lines since December. On its most recent quarterly update, the firm sounded less hopeful that it could reach an agreement with lenders than in the past. Not reaching an agreement has dire consequences-the firm could go bankrupt or it could issue a reverse stock split. But in addition to the acceleration notice, the firm announced its lenders had signed a forbearance agreement in which states the company will pay default interest on all of the notes back-dated to March 30, and pays the lenders a $22 million "make-whole" agreement. The agreement also states that the lenders cannot force the company into bankruptcy, nor will they sue the company to collect payment. Analysts at Stifel Nicolaus expressed confusion over the combination of acceleration and forbearance agreement. Wrote Stifel Nicolaus Analyst Greg Mason: "Why would the lenders "accelerate" if they have also reached a forbearance agreement?"
