American Capital outlines structure

American Capital has announced the structure and financing of its new subsidiary. European Capital will specialise in one-stop buyouts, funding equity, mezzanine and senior debt. It will invest in and sponsor public and private equity buyouts, as well as providing equity for capital growth deals in mid-sized private and public companies. The group intends to invest from E5-125m per transaction to support growth, acquisitions and recapitalisations.European Capital's investment activities are expected to be conducted by European Capital SA and organised as a Luxembourg-based SICAR vehicle. European Capital SA will be a wholly owned subsidiary of European Capital Ltd and will be organised under Guernsey's laws. European Capital Financial Services Ltd will manage both European Capital SA and European Capital Ltd, and will enter into a management agreement with each of these entities. The agreements will allow for certain personnel, advisory services, management systems and facilities for these businesses and certain fees and expense reimbursements will be received in return. Similarly to American Capital, its subsidiary intends to distribute approximately 100% of its operating income to its shareholders as dividends and retain its capital gains.American Capital intends to make a cornerstone investment in European Capital Ltd, valued in the region of E600m. The balance is likely to be raised from third party institutional investors. The equity commitments are expected to be drawn down by European Capital over a two- to three-year period to fund its investments and operations in the ordinary course of business. European Capital is also expected to borrow funds to support its investing activities and its US parent company may provide direct loans or limited credit enhancements to supplement these borrowings. European Capital Ltd may eventually undertake a public offering of its equity securities.

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