ACAS' recent sale of CreditCards.com to BankRate frees the company from a property that, as I understood it, didn't live up to its billing and had ended up being primarily a vehicle for obtaining referral fees. The purchase at $145 million is not all going to ACAS (though the preferred redemption feature may make ACAS effectively a bigger owner than just the size of ACAS' control block), but this value is above ACAS' last-published fair value for the company (<$120m), which makes it interesting to wait for the news. (Of course, exiting 13.9% and 19.0% bonds makes it interesting to ask what ACAS would do with the money that's better. Still, realizing an equity loss will help ACAS avoid paying a larger dividend next year, which is important to maintaining its capital. As much as I enjoy having zero tax expense at ACAS, I enjoy reinvestment more. Realizing losses when recovery looks dim is absolutely sensible.)
ACAS' management has always said that it didn't just sell winners, and getting back capital to invest in more promising deals had great value; this exit seems right in line with that thinking. ACAS will get out of a deal that didn't do what management hoped, and help prevent an outsized dividend next year by realizing losses in the current period on its equity investment in Creditcards.com Inc. Since ACAS (as a BDC) is required to pay 90% of its taxable income in dividends, and ACAS can't be sure it will be in a position to raise capital above NAV to pursue interesting deals, avoiding payment of outsized dividends by early realization of losses makes good sense when the price is right.
With the debt restructuring distraction behind ACAS, I hope to see many distressed situation entries – and shedding unexciting investments seems a great way to fund a more exciting future.
The next question is interesting: why is ACAS under $5? Did people expect a non-bankruptcy pop and then exit when they were bored? Personally, I think we need to see next quarter's earnings results to allow the benefit of the debt restructuring to have any likelihood of showing up in the share price.