Question-and-Answer Session
Operator
Thank you. (Operator Instructions) First question will come from Jim Shanahan with Wachovia. Go ahead, please.
Jim Shanahan - Wachovia
Thank you. Good morning.
Malon Wilkus
Good morning.
Jim Shanahan - Wachovia
What portion of the value of American Capital LLC is associated with European Capital Financial Services? It was $323 million investment at June 30 and but it was only written down modestly. I'm assuming here Malon and John that is going to be written, if European Financial Service goes away and that would negatively impact the value of American Capital, LLC, is that correct?
Malon Wilkus
That's correct. But we look at the valuation; we actually combine the European manager with the fund. On a combined basis we've had that at a discount to NAV. So I think the $260 million pickup, we were talking about would be net of a reduction of the manager.
But I think that for accounting purposes we may actually end up having the European Capital treated as a portfolio company. So, you wouldn't actually have the manager go down and value because those are two separate components would still be there.
But in any event, we valued it. On a combined basis the value of the manager plus the value of our stock has been at a discount to NAV and we would expect that we own 100% of it. We will then value it at about NAV and that is the $260 million or so pickup that we have talked about.
Jim Shanahan - Wachovia
260 on a net basis?
Malon Wilkus
Right.
Jim Shanahan - Wachovia
Because I guess, by my math you had costs exceeding fair value by $109 million at June 30 then with an additional $264 million impairment that's 372 and you are saying you will get $260 net back after, if you go back to NAV on European Capital. Do I have that correct?
Malon Wilkus
Yeah. I think probably, there is probably some currency swings down there as well.
Jim Shanahan - Wachovia
Okay.
Malon Wilkus
Could have changed those numbers.
Jim Shanahan - Wachovia
Okay. I will reckon?
Malon Wilkus
We are just giving you kind of what we expect the net tangible net worth right now to change.
Jim Shanahan - Wachovia
Okay. One more, quick one please. Given the effects of early October, do you think that American Capital would have been in violation of the minimum tangible net worth covenants at any point let’s say even on October 31st?
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