Wachovia Comments on Allied Capital (ALD) On Sell-Off
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Wachovia comments on Allied Capital Corporation (NYSE: ALD) following today's 36% sell-off after its Ciena unit filed for bankruptcy.
The firm notes that as a result of the bankruptcy filing, ALD will be required to cover the guarantees its had provided on Ciena's credit facility. The company estimates this will result in a $320 million cash payment to creditors and it intends to continue to guarantee the remaining facility balance of $10 million.
The firm also noted that he company will record further substantional unrealized depreciation associated with its investment in Ciena in Q3.
Wachovias said the loss is problematic since it will substantially reduce ALD's carryover balance used to cover the divided.
The firm has a Market Perform rating and $13-$15 valuation range on Allied Capital.
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