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  "documentTitle": "Allied Capital (ALD)",
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  "authorName": "David Einhorn",
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  "presentationDate": "2002-06-17 00:00:00",
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  "notes": "This is a page from a research note/investor letter. It uses a narrative structure to build a case against Allied Capital's accounting.",
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      "text": "Greenlight has identified 35% of Allied's specialty finance portfolio that Greenlight believes may be carried above fair value.",
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      "text": "that the market prices with which Allied disagreed were not fire sale levels. To Greenlight, the market price is the market price. If the market price is too low, it will eventually improve, and then the investment can be written back up.",
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      "text": "One sell side analyst from one of Allied’s underwriters defending Allied has written, that “The nuance here is that Allied is required to mark to long term value, not mark to market.”19 Greenlight believes that this is inconsistent with Allied’s stated policy quoted above and the Investment Company Act of 1940.",
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      "text": "The entire market for middle market loans has deteriorated. Allied has not taken adjustment to its portfolio value to reflect the changed market. According to Mr. Walton on the May 29th conference call,",
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      "text": "Greenlight believes the burden is now on Allied’s management to disclose enough information about its entire portfolio to demonstrate affirmatively that the anecdotes described above are isolated. As Mr. Walton said during the May 16th conference call, “We’re committed to transparency and full disclosure.” Greenlight awaits further disclosure.",
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      "text": "If Allied believes its portfolio markings in these instances were justifiable at the time, Greenlight invites them to publicly disclose the contemporaneous analysis they performed. Inasmuch as Velocita, Startec and Loewen are public companies with fully disclosed public data and NetTel is defunct, it is hard to see how disclosure of Allied’s analysis could harm its investees. In Greenlight’s estimation, disclosure is required to restore management’s credibility.",
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      "text": "Greenlight wonders whether the examples identified are isolated or part of a broader problem. Unfortunately for investors, little information is available on many of Allied’s private investments. Greenlight has identified 35% of Allied’s specialty finance portfolio that Greenlight believes may be carried above fair value.",
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      "text": "Greenlight is also critical of certain valuation methodologies that appear to permeate entire sections of Allied’s portfolio.",
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      "text": "“In today’s senior loan environment we are seeing sales as well as discounts that are clearly in the money. What we believe is that some banks have changed their policies about things like acceptable senior leverage ratios. Three years ago, banks were generally willing to lend up to 3.5, sometimes 4.5 times EBITDA. Now EBITDA as we all know is not a measure of cash flow, but is",
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      "text": "“The nuance here is that Allied is required to mark to long term value, not mark to market.” — Sell side analyst from one of Allied’s underwriters. “We’re committed to transparency and full disclosure.” — Mr. Walton, May 16th conference call. “In today’s senior loan environment we are seeing sales as well as discounts that are clearly in the money.” — Mr. Walton, May 29th conference call.",
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      "text": "19 “Allied Capital Corp. – The Song Remains the Same”, Merrill Lynch Equity Research, May 16, 2002, p.2.",
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      "kind": "title",
      "text": "The Whole Portfolio",
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      "text": "Systematic Valuation Concerns:",
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