News

Bethesda, MD – March 12, 2007 - American Capital Strategies Ltd. (Nasdaq: ACAS) announced today the details of $68 million of total net realized gains from the disposition of portfolio investments in the fourth quarter of 2006. During the fourth quarter of 2006, American Capital received $1.5 billion of proceeds from exits and repayments from portfolio investments. Through December 31, 2006, American Capital received total proceeds of $4.7 billion from exits and repayments from portfolio investments since its 1997 initial public offering.

Sale of Equity Interests to American Capital Equity I
In the fourth quarter of 2006, American Capital recognized a total net gain of $59 million from its previously announced sale of 30% of equity interests in 96 of its portfolio companies to American Capital Equity I, LLC, including a $16 million gain for the value of a portion of the management agreement received as sale proceeds.

FMI Holdco I LLC
In the fourth quarter of 2006, American Capital realized a gain through an affiliate of $1 million, net of tax, from the exit of portfolio company FMI Holdco I LLC. FMI is a leading third party logistics provider to the U.S. apparel industry. American Capital recognized total proceeds of $18 million upon the exit, earning a 14% compounded annual rate of return on its investment, including interest, dividends and fees earned over the life of American Capital’s investment. The proceeds received by American Capital were greater than the third quarter 2006 valuation of the investment by $1.7 million, or 11%.

In April 2003, American Capital and an affiliate of American Capital invested $49 million in FMI in a revolving credit facility, senior term loan, subordinated notes and minority equity in support of a recapitalization led by KRG Capital Partners LLC.

“We are pleased to have supported KRG in their investment in FMI,” said Darin Winn, American Capital Regional Managing Director. “We value our ongoing relationship with KRG and the opportunity to have worked with them as FMI responded to growing market demands.”

For more information on the FMI transaction, please go to www.americancapital.com/our_portfolio/companies/fmi_international.html.

NWCC Acquisitions LLC
In the fourth quarter of 2006, American Capital realized a gain through an affiliate of $1 million, net of tax, from the exit of its remaining equity investments in NWCC Acquisitons LLC, the parent of Northwest Coatings LLC. Northwest Coatings is a leading developer and manufacturer of customized specialty energy-curable and water‑based coatings and adhesives serving predominantly customers in the packaging, narrow-web tag and label, printing and other industries. American Capital recognized total proceeds of $4 million upon the exit, earning an 18% compounded annual rate of return on its debt and equity investments, including interest, dividends and fees earned over the life of American Capital’s investment. The proceeds received to date by American Capital were more than the third quarter 2006 valuation of the investment by $0.1 million, or 2%.

In November 2002, American Capital and an affiliate invested $12.5 million in senior subordinated debt and common and preferred equity to support the acquisition of Northwest Coatings by Caltius Equity Partners. In February 2005, American Capital made a subsequent investment in Northwest Coatings, investing $24 million to support an add-on acquisition and to refinance existing debt, including $10 million of American Capital senior subordinated debt. American Capital’s additional investment consisted of a revolving loan facility, senior term loans, subordinated debt and equity. In December 2005, American Capital received full repayment of its senior and subordinated debt investments.

“We are glad we were able to participate in the growth of Northwest Coatings through multiple investments and to work with Caltius, a leading private equity firm,” said Frank Do, American Capital Managing Director.

For more information on the Northwest Coatings transaction, please go to www.americancapital.com/our_portfolio/companies/northwest.html.

Dynisco Parent Inc.
In the fourth quarter of 2006, American Capital realized an additional gain of $2 million from the sale of its remaining equity investment in portfolio company Dynisco Parent Inc. Dynisco is a global manufacturer of branded test, measurement and process control devices for the plastics industry. American Capital recognized total proceeds of $2 million upon the exit, earning a 22% compounded annual rate of return on its total investment, including interest, dividends and fees earned over the life of American Capital’s investment. The proceeds received by American Capital were greater than the third quarter 2006 valuation of the investment by $0.9 million, or 68%.

In July 2004, American Capital invested $15 million in senior subordinted debt and junior subordinated debt with warrants in Dynisco, supporting Audax Private Equity's acquisition. In September 2004, American Capital made a subsequent $14 million investment in Dynisco to support the company’s acquisition of Alpha Technologies US LP, the leading global designer and manufacturer of precision instruments and software for the rubber processing industry. American Capital's additional investment took the form of senior subordinated debt, intermediate subordinated debt with warrants and common equity.

In the fourth quarter of 2005, American Capital received full repayment of its $28 million subordinated debt investments in Dynisco, realizing a gain of $0.6 million on the prepayment of the debt.

“It was a pleasure to support Audax’s investment in Dynisco and its expansion strategy,” said David Ehrenfest Steinglass, Senior Vice President of Corporate Development. “We look forward to working with Audax again on future investments.”

For more information on the Dynisco transactions, please go to www.americancapital.com/our_portfolio/companies/dynisco.html.

Flexi-Mat Holding Inc.
In the fourth quarter of 2006, American Capital surrendered all of its equity securities and certain of senior and subordinated debt securities in Flexi-Mat Holding Inc. for no proceeds, realizing a total loss of $31 million. During the fourth quarter, the operating performance of Flexi-Mat continued to deteriorate significantly and American Capital concluded that it would likely not receive any future proceeds from its debt and equity investments in Flexi-Mat. However, American Capital continues to own $5 million of senior debt in Flexi-Mat. American Capital earned a negative 55% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment. The proceeds received by American Capital were less than the third quarter 2006 valuation of the investment by $9.5 million, or 100%.

For more about the Flexi-Mat transaction, please go to www.americancapital.com/our_portfolio/companies/flexi_mat.html.

Precitech Inc.
In the fourth quarter of 2006, American Capital realized a loss of $8 million from the sale of its portfolio company Precitech Inc. to AMETEK Inc. (NYSE: AME). Precitech is a designer and manufacturer of ultra-precision machining systems. American Capital recognized total proceeds of $9 million upon the exit, earning a negative 13% compounded annual rate of return on its investment, including interest, dividends and fees earned over the life of American Capital’s investment. The proceeds received by American Capital equaled the third quarter 2006 valuation of the investment. American Capital continues to hold an $8 million subordinated debt investment, which is expected to be partially repaid with sale proceeds held in escrow.

In June 2002, American Capital invested $21.5 million in the buyout of Precitech. American Capital’s investment took the form of a senior credit bridge facility, senior term loan, senior subordinated note with warrants and preferred and common equity.

For more information on the Precitech transaction, please go to www.americancapital.com/our_portfolio/companies/precitech.html.

Pelican Products Inc.
In the fourth quarter of 2006, American Capital received full repayment of its $15 million second lien term loan to Pelican Products Inc. Pelican is a global leader in the design, development and manufacture of unbreakable, watertight protective cases and technically advanced professional flashlights. American Capital earned a 12% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment.

In October 2004, American Capital invested $15 million in a second term loan to support Behrman Capital’s acquisition of Pelican.

“Working with Behrman Capital provided us with an opportunity to support Pelican’s growth and new product development,” said Natasha Volyanskaya, American Capital Principal.

For more information on the Pelican transaction, please go to www.americancapital.com/our_portfolio/companies/pelican.html.

Nailite International Inc.
In the fourth quarter of 2006, American Capital received full repayment of its $10 million subordinated loan to Nalite International Inc. and wrote off its minority warrant equity investment. Nailite is a niche manufacturer of molded polypropylene siding for the remodeling and new construction housing markets. American Capital earned a 17% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment. The proceeds received by American Capital were equal to the third quarter 2006 valuation of the investment.

In April 2003, American Capital invested $9.3 million in senior subordinated debt with warrants to support the acquisition of Nailite by Graham Partners.

“Our support of Graham’s investment and an innovative, industry leading portfolio company has worked well for all concerned,” said Ken Jones, American Capital Principal.

For more information on the Nalite transaction, please go to please go to www.americancapital.com/our_portfolio/companies/nailite.html.

Zenta Global Ltd.
In the fourth quarter of 2006, American Capital received full repayment of its $64 million senior loans to Zenta Global Ltd. Zenta is a U.S.-based leader in high quality business process outsourcing services, with operations in India. American Capital earned a 21% compounded annual rate of return on its debt investment, including interest and fees earned over the life of American Capital’s investment. American Capital continues to own a minority equity interest in H-Cube LLC, the parent of Zenta.

In May 2005, American Capital invested $28.5 million in a senior term loan and equity in Zenta, supporting H-Cube LLC’s acquisition of Zenta. H-Cube was formed by GTCR Golder Rauner LLC and is a business process outsourcing company focused on acquiring and operating business process and technology-based outsourcing companies. In December 2005, American Capital invested an additional $20.2 million in Zenta for the add-on acquisition of Global Realty Outsourcing, a leading real estate outsourcing partner to the commercial and residential real estate markets. In March 2006, American Capital invested an additional $16.7 million in Zenta for the add-on acquisition of Blackheath Financial LLC, a real estate finance consulting and staff augmentation firm that provides outsourcing services to financial institutions that participate in the CMBS market.

“Our optimism concerning Zenta was well justified,” said Demian Kircher, American Capital Principal. “We are also pleased to continue our solid working partnership with GTCR.”

For more information on the Zenta transaction, please go to please go to www.americancapital.com/our_portfolio/companies/hcube.html.

The Hilsinger Company
In the fourth quarter of 2006, American Capital received full repayment of its $35 million senior and subordinated loans in The Hilsinger Company. Hilsinger is the leading provider of eye care accessories and supplies in the U.S. and the U.K. American Capital earned a 15% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment.

In May 2004, American Capital invested $60 million in a revolving credit facility, senior term debt, a senior secured acquisition line and senior and junior subordinated debt supporting the recapitalization of Hilsinger by ICV Capital Partners and Palladium Equity Partners LLC. In May 2004, American Capital syndicated $20 million of the senior term debt.

“We were able to support ICV and Palladium by providing a cost effective one-stop debt facility,” said Robert Klein, American Capital Managing Director. “In addition, we are gratified to see Hilsinger’s growth during the time of our investment.”

For more information on the Hilsinger transaction, please go to www.americancapital.com/our_portfolio/companies/hilsinger.html.

Gibson Guitar Corp.
In the fourth quarter of 2006, American Capital received full repayment of its $32 million second lien notes in Gibson Guitar Corp. Gibson is a well-known designer, manufacturer, marketer and distributor of electric and acoustic guitars, bass guitars, banjos and mandolins, pianos, drums, keyboards, electronically synthesized instruments and a variety of instrument-related products and accessories. American Capital earned a 16% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment.

In August 2004, American Capital provided financing facilities of up to $52.2 million to Gibson. American Capital’s investment took the form of second lien notes and a second lien committed acquisition line.

“We are delighted that our association with a music industry icon has worked well for all parties and that our financing allowed Gibson the flexibility it required to manage its growth,” said Jeff MacDowell, American Capital Managing Director.

For more information on the Gibson Guitar Corp. transaction, please go to www.americancapital.com/our_portfolio/companies/gibson.html.

SmithBucklin Corporation
In the fourth quarter of 2006, American Capital received full repayment of its $17 million senior and subordinated loans in SmithBucklin Corporation. SmithBucklin is the world's largest association management and professional services company. American Capital earned a 17% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment.

In June 2005, American Capital invested $17 million in a senior term B loan and senior subordinated debt to support the SmithBucklin Employee Stock Ownership Plan's ("ESOP") purchase of the business from the financial investors who had the majority interest in the Company.

“American Capital’s support of an employee stock ownership plan has been especially rewarding for us,” said Greg Long, American Capital Vice President. “We wish the employee owners of SmithBuklin well.”

For more information on the SmithBucklin transaction, please go to www.americancapital.com/our_portfolio/companies/smithbucklin.html.

A.H. Harris & Sons Inc.
In the fourth quarter of 2006, American Capital received full repayment of its $10 million subordinated loans in A.H. Harris & Sons Inc. American Capital earned a 15% compounded annual rate of return on its debt investment, including interest and fees earned over the life of American Capital’s investment. American Capital continues to own a minority equity warrant investment in A.H. Harris.

“A.H. Harris has grown significantly during our seven year investment and we look forward to remaining a minority investor in the company,” said Darin Winn, American Capital Regional Managing Director.

For more information on the A.H. Harris & Sons transaction, please go to www.americancapital.com/our_portfolio/companies/ah_harris.html.

Other Company Exit and Repayments
American Capital also recognized a net realized gain of $38 million from the sale of one portfolio company earning a 52% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment. American Capital also recognized a net realized gain of $6 million from the exits and repayments of various other portfolio investments during the fourth quarter of 2006.

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From its IPO through the fourth quarter of 2006, American Capital has earned an 17% compounded annual return on 164 exits and repayments of senior debt, subordinated debt and equity investments, totaling $4.7 billion of invested capital, including interest, dividends, fees and net gains on these investments. These exits and repayments represent 35% of all amounts invested by American Capital since its August 1997 IPO.

For a chart showing American Capital’s exited portfolio companies, please go to www.americancapital.com/our_portfolio/exited.html.

ABOUT AMERICAN CAPITAL

American Capital is the second largest U.S. publicly traded alternative asset manager with approximately $11 billion in assets under management (second to Fortress (NYSE: FIG)). American Capital, both directly and through its global asset management business, is an investor in management and employee buyouts, private equity buyouts, and early stage and mature private and public companies. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions, recapitalizations and securitizations. American Capital and its affiliates invest from $5 million to $750 million per company in North America and €5 million to €400 million per company in Europe.

As of February 28, 2007, American Capital shareholders have enjoyed a total return of 590% since the Company's IPO - an annualized return of 23%, assuming reinvestment of dividends. American Capital has paid a total of $1.4 billion in dividends and paid or declared $23.33 dividends per share since going public in August 1997 at $15 per share.

Companies interested in learning more about American Capital's flexible financing should contact Mark Opel, Senior Vice President, Business Development, at (800) 248-9340, or visit www.AmericanCapital.com or www.EuropeanCapital.com.

This press release contains forward-looking statements. The statements regarding expected results of American Capital are subject to various factors and uncertainties, including the uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional, national or international economic conditions, or changes in the conditions of the industries in which American Capital has made investments.

Contact
Tom McHale, Senior Vice President, Finance (301) 951-6122

SOURCE: American Capital Ltd.