American Capital shares dive to all-time low

The stock plunged $5.90, or 42.9 percent, to close at $7.87 after hitting a fresh low of $7.65 earlier in the session.

The Bethesda, Md.-based company said it lost $548 million, or $2.63 per share, compared with earnings of $21 million, or 11 cents per share, during the same quarter last year.

During the third quarter, the company recorded an unrealized depreciation charge of $698 million. Within the depreciation charges, American Capital reduced the value of its investment in European Capital by $264 million because of share price decline.

The company also announced Monday it is acquiring the remaining 32.3 percent stake in European Capital it does not already own and suspending its share repurchase program as part of the plan.

BMO Capital Markets Corp. analyst David J. Chiaverini lowered his 2009 share price target to $9 per share from $19 and maintained his "Underperform" rating on American Capital.

In a note to investors Monday, he said the company's book value declined 10 percent, debt increased and the company is at risk of breaching its $4.5 billion minimum net worth covenant in its debt agreements. If the company's net worth falls below that level, its lenders could demand their money back sooner.

Chiaverini noted American Capital's credit quality weakened as its nonperforming asset ratio increased to 10 percent from 8 percent.