Bethesda, Md.-based American Capital saw its shares shed 17 cents, or 5.8 percent, to $2.76 in midday trading. The stock has traded in a 52-week range of 58 cents to $28.49.

S&P on Friday cut American Capital's long-term counterparty credit rating further into non-investment grade territory, to "B-" from "BB-" with a negative outlook, signaling the possibility of another downgrade if business conditions worsen.

Earlier this month, American Capital reported a second-quarter loss of $2.52 per share, compared with a loss of 34 cents per share in the same quarter the year before. Realized loss per share was $1.41 for the quarter, compared with a realized gain of 95 cents in the quarter a year ago.

S&P said its rating action reflects the accelerated deterioration in American Capital's realized earnings and reported leverage in the second-quarter, as well as the weakening performance of its portfolio companies.

Mending the firm's balance sheet will take an extended period during which it will continue to face uncertainty in negotiations with lenders, said S&P credit analyst Jeffrey Zaun.

He said the company's uncertain future and financial difficulties could lead key personnel to leave.

The negative outlook reflects Zaun's expectation that the credit quality of American Capital's loan portfolio will continue to deteriorate and the uncertainty over whether it can successfully negotiate debt covenant relief.

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