S&P downgrades American Capital

Standard & Poor's said it lowered its ratings on American Capital Ltd., including lowering the long-term counterparty credit rating to B- from BB- and its senior notes to B-.

The outlook is negative.

The agency said the downgrade reflects the accelerated deterioration in the firm's realized earnings and reported leverage in the second quarter of 2009 as well as the weakening performance of its portfolio companies.

These concerns are partially offset, in S&P's view, by capital levels that continue to provide some cushion against losses.

The negative outlook reflects the agency's expectation that the credit quality of the firm's loan portfolio will continue to deteriorate as well as uncertainty with respect to American Capital's ability to successfully negotiate covenant relief.

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