American Capital raises $450m CLO equity fund

In second quarter earnings released today, the Maryland-headquartered firm disclosed that it expects to close its first European senior debt fund by March 2016 and said initial filings for the spin out of its BDC would be made next month.

Nasdaq-listed American Capital has established a new $450 million fund focused on investing in the equity tranches of collateralised loan obligations (CLOs).

Capital from the fund, raised entirely from third party investors, will purchase $300 million of American Capital’s existing CLO equity portfolio at fair value as it stood on 30 June 2015.

The fund will have an investment capacity of $150 million and American Capital Asset Management (ACAM) will manage the fund for customary management and incentive fees, the firm said.

American Capital will use proceeds for investment and lending activities, the firm said, and the fund is due to close within the next 90 days.

“We believe that raising the fund is a meaningful vote of confidence for the asset class,” management said during a call discussing its second quarter results.

The transaction will increase American Capital’s third-party fee-earning assets under management by 3 percent. Following the close, ACAM will manage 14 private funds and three public funds with around $16 billion of third-party fee-earning assets under management and $82 billion of total assets under management including levered assets. 

The Bethesda, Maryland-headquartered firm also reported net operating income (NOI) before taxes of $97 million or $0.34 per diluted share for the second quarter. The net asset value per share rose to $20.35, a $0.23 per share increase from 31 March 2015.

During the quarter, the manager’s European debt subsidiary, European Capital, held a close on €318 million, American Capital confirmed. The manager is targeting $500 million in total for its first senior debt fund and has held a second close, as previously reported by PDI. American Capital anticipates a final closing by March 2016.

The new European Capital debt fund includes €153 million of third-party investments and commitments, the firm said. European Capital sold €162 million of assets into the fund. The firm’s investment and remaining commitments to the fund total €165 million. 

The fund, which will have a three-year investment period, will be managed by European Capital for an annual base management fee of 1.5 percent and 15 percent incentive fees, subject to performance hurdles.

American Capital also closed a $552 million CLO fund during the quarter, the ACAS CLO 2015-1. Since then, it has closed its second CLO of 2015, the $510 million ACAS CLO 2015-2. 

The firm is in the process of spinning out its business development company, American Capital Income, and announced it will buy back shares in the region of $300 to $600 million ahead of the spinout. Malon Wilkus (pictured), chairman and chief executive officer, said in a statement: “We made good progress preparing for the spin-off of American Capital Income and remain on track to make initial regulatory filings this September.”

American Capital manages $23 billion of assets including assets on its balance sheet.