Tuesday, May 18, 2010

ACAS: IPO Fever?

The Jaded Consumer recently cheered the apparently impending Mirion IPO, which presumably will be closing in short order. ACAS has been busy, though. There's more IPO in the quarter:

ACAS recently enjoyed the Roadrunner Transportation Services (Ticker:RRTS) IPO onto the NYSE at $14/share. Although American Capital entities (including managed funds) held some 1,493,138 shares amounting to a 7.3% interest in the newly-fledged public company (which would be valued at about $10.8m at IPO prices), ACAS claimed only 7,000 shares in its 1Q2010 10-Q. The 7,000 shares seemed to have a FAS-157-compliant value of $7.9m, making it apparent that some kind of share conversion or transmutation was afoot between the end of the quarter and the day the shares launched: 7,000 shares weren't any $7.9m at $14 a pop. Without specific knowledge of the split of RRTS between ACAS and its managed funds, it would be hard to ascertain the receipts that will actually flow to ACAS' bottom line. ACAS valued the debt it was owed by Roadrunner at $21m at the end of 1Q2010, and Roadrunner acknowledged about $20.5m in principal owed ACAS at the end of 2009 but discussed a deferred-interest arrangement in which RRTS would owe ACAS a deferred margin atop its periodic payments. Presmably ACAS' payoff includes all the deferrals in addition to the principal and interest. The comment from the Prospectus was: "This amount includes $20.5 million owed to American Capital, Ltd., which we intend to pay from the net proceeds of this offering." The question is what beyond the $20.5m ACAS gets in the deal. Anybody have an idea?

Now that RRTS is actually trading, it's safe to say that – press release or no – ACAS has its cash back. The next question is whether the Mirion transaction – first filed last August, and re-filed as a bigger deal twice since then – will occur as described. Give it a few days and we may know more.

As for ACAS' debt restructuring, I can't imagine that ACAS doesn't prefer to get out of its default-rate debt and into a more respectable posture from which it could go back to issuing shares above NAV. And why would Paulson have invested in a deal that his due diligence didn't assure him was about to get straightened out? And why would ACAS have parted with shares below NAV without a hard plan to turn the money into improved NAV? It's times like these that the wait until after the end of the quarter to learn what happened seems such a loooooooong time. Hopefully we get some news soon so we can stop speculating, and the market can stop fearing.


Anonymous said...

You need to track it down a couple of years to figure it out. ACAS used to have 10,000 shares of roadrunner, but then sold 30% to ACAS ACE, those 10,000 shares converted to 1.4M common shares (from the S-1) so ACAS should get about 14M from their equity position in RRTS

Jaded Consumer said...

I was able to work out that the 7,000 sh was what should be left after the 30% sale I recalled, but I wasn't sure that ACAS didn't have some other transaction I didn't notice.

What I completely missed was the conversion of 10k shares to 1.4m shares. If ACAS holds 70% of the whole ACAS-related holdings, ACAS' gross from the exit (debt and equity both) should be in the neighborhood of 20.5m+7.6m=28.1m. Given that the equity had been valued at $0, this isn't too bad :-)

Let's hope more $0 assets are really closer to $8m.

Thanks for posting what you saw!