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Victory for Einhorn: Allied Capital In Default
After seemingly endless years of wrangling back and forth, Einhorn has finally been vindicated: Allied Capital announced in an 8K today that it was notified by its lenders of a default in its credit facility, an event which will severely hamper the company's liquidity, and is the first step on the road to Allied's utter annihilation. From the 8K:
The administrative agent for the revolving credit facility has notified the Company that an event of default has occurred pursuant to the revolving credit facility. An event of default under the revolving credit facility constitutes an event of default under the private notes.
Neither the lenders nor the noteholders have accelerated repayment of the Company’s obligations; however, the occurrence of an event of default permits the administrative agent for the lenders under the revolving credit facility, or the holders of more than 51% of the commitments under the revolving credit facility, to accelerate repayment of all amounts due, to terminate commitments thereunder, and to require the Company to provide cash collateral equal to the face amount of all outstanding letters of credit. Pursuant to the terms of the private notes, the occurrence of an event of default permits the holders of 51% or more of any issue of outstanding private notes to accelerate repayment of all amounts due thereunder. Acceleration of the amounts outstanding under the revolving credit facility or any issue of the private notes could have a material adverse impact on the Company’s liquidity, financial condition and/or results of operations.The existence of an event of default restricts the Company from borrowing or obtaining letters of credit under its revolving credit facility, and from declaring dividends or other distributions to its shareholders.
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