Wednesday, October 1, 2008

Allied Capital Covers Bankrupt Unit for US$150M

Followers of the Education investment industry will be interested to know what is happening at Allied Capital. The holding company has just paid out US$150M to cover the costs of bankruptcy proceedings for Ciena, one of the company's portfolio companies.

Financial distress collapses Ciena.

The company attributed Ciena's troubles to the uncertainty in the financial markets, which it said forced it to write down the value of its loans to businesses to the point at which Ciena became insolvent. It voluntarily sought Chapter 11 bankruptcy protection, and Allied stepped in to guarantee Ciena's obligations to its lenders.

Allied said it would use $150 million in cash and other liquid securities and may borrow $170 million on its revolving line of credit to cover Ciena's obligations. Allied also will guarantee a remaining balance of $10 million on Ciena's line of credit.

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