Restructuring & Reorganization
Selected Transactions

February 2009

Company Description
Allied Capital Corporation (“Allied” or the “Company”) is a leading business development company that provides debt and equity capital to middle market companies in a variety of industries. Since its founding, the Company has invested more than $14 billion in small and growing companies. In addition to its portfolio of investments, Allied manages private funds and had total assets of approximately $3.4 billion as of Q2 2009.

Situation Overview
On December 31, 2008, after extensive discussions with its bank lenders and medium term noteholders, Allied agreed to amend certain terms of its credit facility and note agreements including reducing its capital maintenance and interest coverage covenants in exchange for granting a first priority lien on substantially all of its assets. However, due to significant deterioration in the capital markets and the global recession, Allied faced potential significant markdowns of the value of its asset portfolio and was unable to close on its December 30th amendment without immediately being in default.

Transaction Summary
In February 2009, Allied hired Blackstone and re-engaged its lenders in order to work out a solution. Blackstone performed extensive due diligence on Allied’s portfolio of over 100 individual investments and developed a comprehensive operating model to examine the Company’s liquidity profile, determine optimal capital structure solutions, and analyze financial covenants. 

Allied was ultimately able to successfully complete an out-of-court restructuring that required 100% lender and noteholder consent. Blackstone played a critical role in negotiating with numerous disparate creditor constituencies. The restructuring provided the Company with the financial and operational flexibility needed to continue to execute its business strategy and deliver value to its shareholders. Total outstanding debt was reduced from $1.9 billion to $1.6 billion (pro forma for transaction) and covenant levels were set to provide increased financial and operational flexibility. The Company’s maturity profile was also restructured to coincide with projected asset sales.

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