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American Capital to prepay USD107m of outstanding debt

American Capital, a private equity firm and asset manager, has given notice today to the holders of its secured debt due in 2013 that it will voluntarily prepay USD107m of the debt on 29 November 2010.  

With this prepayment, the amount outstanding under the secured debt will be less than USD1.0bn, causing the interest rate on the remaining debt to decline to the lowest level under the governing debt agreements.

The company’s fixed rate notes, representing 83 per cent of the remaining secured debt, will bear interest at an annual rate of 7.96 per cent and its secured loans and floating rate notes will have an annual interest rate of Libor plus 550 basis points, with a two per cent Libor floor. These rates are one per cent less than the rates currently being paid.

The secured debt is due in December 2013 and was issued by the company in June 2010 in connection with the refinancing of the company’s USD2.4bn of then-outstanding unsecured indebtedness. 

The company voluntarily prepaid USD200m of the secured debt in the third quarter of the year. 

With the voluntary prepayments, there is no scheduled amortisation of the remaining secured debt until 30 June 2013.

With this payment, American Capital will have reduced its total debt by USD3.0bn since its peak at the end of the second quarter of 2007.

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