Tortoise Energy Capital Corp. Provides Asset Coverage Ratio Update
10 Oktober 2008 - 1:45AM
Business Wire
Tortoise Energy Capital Corp. (NYSE: TYY) is providing an update
for stockholders regarding its leverage coverage ratios due to
broad based concerns over the recent decline in MLP values. Over
the past several weeks we have witnessed one of the most volatile
periods on Wall Street since the Great Depression, and the most
volatile period ever experienced in the MLP sector. The market
values of MLP equity securities, along with many other equity
securities, have been experiencing substantial declines as a result
of the ongoing financial crisis. From June 1 through October 8,
2008, the Wachovia MLP Total Return Index has declined by 39.3
percent. For the first three days of this week, the Index declined
by 18.4 percent. We believe these declines have not been driven by
fundamental weakness in the energy infrastructure sector; rather we
believe the unwinding of leverage and liquidity concerns in the
broader financial market have driven a sell-off of MLPs. TYY has
used leverage to acquire MLPs consistent with its investment
philosophy. The terms of TYY leverage are governed by regulatory
and contractual asset coverage requirements that arise from the use
of leverage. Under the Investment Company Act of 1940 (the 1940
Act), the company may not pay distributions to its common
stockholders if it does not meet a 300 percent asset coverage ratio
for notes and 200 percent asset coverage ratio for preferred shares
after payment of the distribution, and it may not pay distributions
on its preferred shares if the company fails to meet the 200
percent asset coverage ratio on its senior notes and preferred.
Further, under the terms of its senior notes and preferred shares,
if the company fails to meet basic maintenance ratios as of any
valuation date (generally Fridays) or fails to satisfy the 1940 Act
asset coverage ratio as of the last business day of any month, the
company could be subject to mandatory redemption of the senior
notes or preferred shares if such failure is not waived or cured.
In some cases the company may be delayed in paying common stock or
preferred share distributions until such coverage ratios can be
met. The cure period is 30 days for the senior notes and 10
business days for the preferred shares. As of Friday, October 3,
the company passed all of the tests indicated on that valuation
date. TYY�s asset coverage ratio under the 1940 Act with respect to
senior securities representing indebtedness was 313 percent, and
its coverage ratio for preferred shares was 209 percent. Its senior
notes and preferred shares basic maintenance coverage ratios (1.00
times required) were 1.36 times and 1.11 times, respectively. (For
more information on calculation of coverage ratios, please refer to
our most recent applicable prospectus.) However, as a result of the
decline in portfolio company market values during this week, the
company may not have sufficient coverage ratios to meet one or all
of these tests at its next valuation date. In response to these
conditions, management will continue to work toward meeting asset
coverage requirements on an ongoing basis; however, we will not be
reporting on every valuation date. Several things could favorably
impact asset coverage ratios, including: an increase in market
values of portfolio holdings, issuance of additional equity (if the
market and 1940 Act requirements permit), the sale of portfolio
investments and repayment of leverage, or a delay in the payment of
common or preferred distributions. The non-payment of common
distributions would allow the company to de-lever and sell less of
its investments at a time when we find the relative value for MLPs
to be attractive. TYY paid its third quarter distribution on
September 2, and normally declares its fourth quarter distribution
during the second week in November. While the current market
conditions have been challenging, we maintain our long-term
positive outlook for MLPs. These companies have generally continued
to report growth in distributions to their investors, and, we
believe are fundamentally strong, providing critical services to
our country. We believe investors will be rewarded in the long run
by continued investment in the MLP sector and TYY. About Tortoise
Energy Capital Corp. Tortoise Energy Capital Corp. provides
financing for master limited partnerships (MLPs) in the energy
infrastructure sector, focusing on crude oil and refined petroleum
products, MLPs and natural gas and natural gas liquids pipelines
MLPs. Tortoise Energy Capital Corp. seeks to provide its
stockholders a high level of total return with an emphasis on
current distributions. About Tortoise Capital Advisors Tortoise
Capital Advisors, LLC is a pioneer in capital markets for master
limited partnership (MLP) investment companies and a leader in
closed-end funds and separately managed accounts focused on MLPs in
the energy sector. As of Sept. 30, 2008, the adviser had
approximately $2.2 billion of assets under management. For more
information, visit our Web site at www.tortoiseadvisors.com. Safe
Harbor Statement This press release shall not constitute an offer
to sell or a solicitation to buy, nor shall there be any sale of
these securities in any state or jurisdiction in which such offer
or solicitation or sale would be unlawful prior to registration or
qualification under the laws of such state or jurisdiction.
Forward-Looking Statement This press release contains certain
statements that may include �forward-looking statements� within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934. All statements, other
than statements of historical fact, included herein are
"forward-looking statements." Although the company and Tortoise
Capital Advisors believe that the expectations reflected in these
forward-looking statements are reasonable, they do involve
assumptions, risks and uncertainties, and these expectations may
prove to be incorrect. Actual results could differ materially from
those anticipated in these forward-looking statements as a result
of a variety of factors, including those discussed in the funds�
reports that are filed with the Securities and Exchange Commission.
You should not place undue reliance on these forward-looking
statements, which speak only as of the date of this press release.
Other than as required by law, the company and Tortoise Capital
Advisors do not assume a duty to update this forward-looking
statement.
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