Allied Capital Portfolio Co. Files For Bankruptcy
Another day, another sign of trouble in the lending world.
An Allied Capital portfolio company called Ciena Capital has filed for bankruptcy, following "significant deterioration in the value of its assets," D.C.-based Allied Capital said in a statement.
Allied Capital said it intends to pay off $320 million in Ciena loans, using $150 million of its cash and possibly borrowing the rest, becoming Ciena's senior lender.
Ciena is a New York financial services company. According to Bloomberg, it listed both debt and assets ranging from $100 million to $500 million in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Manhattan.
Ciena sought court protection along with 10 affiliates. Its largest unsecured creditor is the U.S. Small Business Administration, with a disputed claim of $1.8 million, according to the filing.
The bleeding may not be over, Allied said in its statement:
"The values of Ciena's assets have continued to decline as credit markets and the economy have deteriorated. As a result, Allied Capital currently expects that it will record substantial further unrealized depreciation in the value of its investment in Ciena for the quarter ending September 30, 2008. Allied Capital believes that through the bankruptcy process Ciena will avoid having to sell its assets in today's unfavorable market conditions, and will instead be able to service and maximize the sales value of its assets, which in turn will allow for a maximum recovery for all creditors, including Allied Capital for any amounts paid under the guaranty. Allied Capital will not realize a loss on its investment in Ciena solely as a result of the bankruptcy filing; however, the amount and timing of any future realized loss on its investment in Ciena will depend on future asset sales, future market conditions and the outcome of Ciena's bankruptcy proceedings."
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