FOR IMMEDIATE RELEASE:
March 5, 2007

Contact
John Capperella, Managing Director, Second Lien Group (212) 444-9320
Brian Maney, Director, Corporate Communications (301) 951-6122

AMERICAN CAPITAL ANNOUNCES FORMATION OF SECOND LIEN GROUP

Bethesda, MD – March 5, 2007 - American Capital Strategies Ltd. (Nasdaq: ACAS) announced today the formation of its Second Lien Group.  Led by John Capperella, Managing Director, the Second Lien Group offers secured and unsecured junior capital investments to support an array of financing needs across a variety of industries. The Group invests in junior capital, with a concentration on syndicated investments that are distributed through the loan sales desks of the market’s growing junior capital arranger community.  Also joining the Group are Vice Presidents Steven Devloo and Ryan Brauns and Associates Dipalee Rathod, Matt Crumrine and Kathy Grabenstatter.

“We are delighted to announce that John Capperella has joined American Capital to start and head the new Second Lien Group,” said Ira Wagner, American Capital Chief Operating Officer.  “John’s wealth of experience makes him ideal to lead American Capital’s second lien business.  The establishment of this Group adds another component to our alternative asset management business of investing predominately in the junior securities of private companies.”

Since its formation, the Second Lien Group has invested approximately $86 million in six companies, including Gold Toe-Moretz, a designer, manufacturer, marketer and retailer of socks; Neways International, a marketer of nutritional supplements, skin-care and other cosmetic products; Integraph, a global provider of spatial information management software; MagnaCare Holdings Inc., a New York-based provider of health management services; Butler Animal Health Supply Inc., a distributor of animal health related products; and Forest Alaska Operating LLC, a subsidiary of Forest Oil Corporation, an oil and gas company engaged in the acquisition, exploration, development and production of reserves primarily in North America.  The Forest Alaska investment was executed jointly by American Capital's Second Lien and Energy Groups. For more information on the Forest Alaska investment, click here.

“I am pleased to be heading American Capital’s Second Lien Group at such an exciting time in the junior capital market,” said John Capperella, American Capital Managing Director.  “The second lien market has grown significantly in the past five years.  2006 was another record breaking year for the second lien business, with the market size reaching $30 billion and transaction volume and size increasing considerably.  We anticipate that the years ahead will be even more active for both second lien and mezzanine, and that they will continue to present excellent investment opportunities for American Capital.”

Mr. Capperella joined American Capital after serving as Senior Vice President at GE Capital Markets where he was responsible for structuring and selling all GE junior capital investments.  Prior to GE, Mr. Capperella worked at two mezzanine funds, where he was responsible for originating, structuring and closing middle market loans.  Mr. Capperella began his leveraged lending career at Heller Financial, where he spent nine years underwriting, documenting, closing and monitoring asset-based and cash flow investments.  Mr. Capperella holds a B.S. degree in Civil Engineering from the University of Delaware and an M.B.A. from the University of Chicago.

Mr. Devloo joined American Capital from the Leveraged Finance/Financial Sponsors Group at Credit Suisse First Boston and Mr. Brauns joined American Capital from the Corporate Lending Group at GE Capital.  Ms. Rathod joined American Capital from the Leveraged Finance Group at Deutsche Bank,  Mr. Crumrine joined American Capital from the M&A Group at Dresdner Kleinwort Wasserstein, and Ms. Grabenstatter joined American Capital from the Corporate Finance Group at Prudential Capital.

ABOUT THE AMERICAN CAPITAL SECOND LIEN GROUP

The Second Lien Group offers secured and unsecured junior capital investments to support an array of financing needs across a variety of industries. With a nationwide focus, the Group brings a rich and successful heritage of junior capital investing to bear in all of its investments and a concentration on syndicated loans that are distributed through the loan sales desks of the market’s growing junior capital arranger community. For a prompt review and a committed financial partner, please contact John Capperella at (212) 444-9320.

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.

Performance data quoted above represents past performance of American Capital. Past performance does not guarantee future results and the investment return and principal value of an investment in American Capital will likely fluctuate. Consequently, an investor's shares, when sold, may be worth more or less than their original cost. Additionally, American Capital's current performance may be lower or higher than the performance data quoted above.

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.