Fitch: Allied Capital on watch

Fitch Ratings said it has placed Allied Capital Corp.'s issuer default rating and debt rating on rating watch negative as follows: long-term issuer default rating BBB and senior unsecured debt BBB.

According to the agency, the rating watch negative reflects unrealized portfolio depreciation beyond Fitch's expectations.

The depreciation has resulted in a shrinking asset coverage ratio and the need for Allied to seek a covenant amendment from its private unsecured term debt holders due to a decline in its tangible net worth, the agency said, noting that the company recorded $378.7 million in net unrealized portfolio depreciation in the third quarter of 2008, which eroded $432.4 million of tangible net worth and reduced the asset coverage ratio to 213% from 239% in the prior quarter.

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