American Capital Initiated At Overweight By JP Morgan

JP Morgan has published a research report on American Capital (NASDAQ: ACAS) and has initiated coverage on the company with an Overweight rating.

In the report, JP Morgan writes "We are initiating coverage of American Capital, Ltd., with an Overweight rating and $10.00 YE2011 price target. ACAS is a mature BDC in the midst of a turnaround. While the company faces many challenges, we believe there is significant upside potential for investors willing to embrace high risk. During the peak of the financing cycle, ACAS grew excessively, increasing equity exposure and credit risk. In late 2008, ACAS breached its debt covenants and the company's viability became uncertain. Following an equity financing and debt restructuring, leverage has been reduced. ACAS appears to be on a path to recovery as fundamentals improve and middle market activity rebounds. Our price target of $10.00 is based upon the present value of future earnings in excess of required return. ACAS is our top pick in the BDC sector."

American Capital closed Friday at $7.86.