FOR IMMEDIATE RELEASE:
February 14, 2008

Contact
Tom McHale, Senior Vice President, Finance (301) 951-6122
Brian Maney, Director, Corporate Communications (301) 951-6122

AMERICAN CAPITAL PROVIDES DETAILS OF $41 MILLION NET REALIZED GAINS FROM PORTFOLIO COMPANIES IN FOURTH QUARTER 2007

Bethesda, MD – February 14, 2008 – American Capital Strategies Ltd. (Nasdaq: ACAS) announced today information regarding $41 million of total net realized gains from the disposition of portfolio investments in the fourth quarter of 2007.  The portfolio net realized gains exclude realized gains or losses from interest rate derivatives, taxes on realized gains and foreign currency transactions.  During the fourth quarter of 2007, American Capital received $1.5 billion of proceeds from the disposition of portfolio investments.

“American Capital is continuing to experience significant net realized gains from exits of its portfolio investments,” says John Erickson, American Capital Chief Financial Officer.  “Despite the credit crunch, American Capital received approximately $2.9 billion of realizations in the second half of 2007.  For the most part, these funds will be used to make future investments in one of the best investment climates in years.  The $41 million of net realized gains in the fourth quarter includes the realization of several significant losses.  American Capital continues to realize losses by exiting investments that have performed poorly once it becomes evident that we will not be able to improve a portfolio company’s performance.  As a result, overall our current portfolio of investments is performing very well.”

“Based on our proprietary database of middle market (less than $1 billion of enterprise value) transactions, buyout activity in the fourth quarter of 2007 continued to be strong at about 260 transactions.  This was greater than the approximately 225 transactions we identified in the fourth quarter of 2006, although it was slightly below the approximately 280 transactions we identified for each of the second and third quarters,” said Ira Wagner, American Capital Chief Operating Officer.  “In addition, average enterprise value multiples appear to have declined only slightly in the fourth quarter from earlier in 2007, and continue to be in excess of nine times EBITDA.  Strategic buyers continue to have the capital to fund transactions and private equity firms, many with significant available capital after three years of record breaking fund raising, are having no difficulty funding their middle market transactions. This is in contrast to the difficulty firms have experienced in raising financing for transactions greater than $1 billion in enterprise value.  We continue to look forward to significant liquidity in our portfolio in 2008, which we will use to reinvest in great companies.”

Since its August 1997 IPO through the fourth quarter of 2007, American Capital has earned a 16% compounded annual return, including interest, dividends, fees and net gains, on 225 realizations of senior debt, subordinated debt and equity investments, totaling $10 billion of committed capital.  These realizations represent 44% of all amounts invested by American Capital since its August 1997 IPO.  Proceeds from these realizations exceeded the total associated prior quarter valuation of the investments by 1%.  American Capital earned a 30% compounded annual return on the exit of its equity investments, including dividends, fees and net gains.

Ranpak Inc.
American Capital previously announced that it recognized a gain of $45 million in the fourth quarter from the sale of its portfolio company Ranpak Inc. to Odyssey Investment Partners LLC.  American Capital’s inception to date total realized gain on its investment in Ranpak was $77 million.  American Capital earned a 31% 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 less than the third quarter 2007 valuation of the investment by $11 million, or 5%.  Including the investments in Ranpak of American Capital’s affiliated funds under management, the gain totaled $104 million over the life of the investment.  For more on the Ranpak investment, click here.

Sale of Equity Interests to American Capital Equity II
American Capital also previously announced that it sold 17% of its equity investments in 80 portfolio companies to American Capital Equity II, LP in the fourth quarter for an aggregate cash purchase price of $488 million.   Through a subsidiary, American Capital LLC, a wholly-owned portfolio company of American Capital, will provide asset management services to American Capital Equity II for a 2% annual management fee on the cost basis of the assets and a 10%-30% carried interest in the net profits of American Capital Equity II, subject to performance hurdles.  American Capital realized a gain of $78 million in the fourth quarter.  For more information on the sale to American Capital Equity II, click here.

The Redwood Companies
In the fourth quarter of 2007, American Capital realized a gain of $5 million from the sale of its portfolio company, RTL Acquisition Corp., the parent of The Redwood Companies, to Inverness Medical Innovations Inc. (AMEX: IMA).  The Redwood Companies is a leading provider of drugs-of-abuse lab testing services and on-site test kits to the correctional, rehabilitation and point-of-care markets.  American Capital earned a 20% 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 2007 valuation of the investment by $0.6 million, or 2%.

In February 2006, American Capital invested $79.5 million in the One Stop Buyout™ of Redwood.  American Capital's investment took the form of a revolving credit facility, senior debt, senior subordinated debt and preferred and common equity.

“We’re pleased to have worked with the management team at Redwood and wish them continued success under the new leadership of Inverness Medical Innovations,” said Frank Do, Managing Director, American Capital Buyout Group. 

For more information about the Redwood investment, click here.

Varel Holdings Inc.
In the fourth quarter of 2007, American Capital’s portfolio company Varel Holdings Inc. was sold to Arcapita Inc.  American Capital realized full repayment of its $66 million debt investment and sold its common stock warrant investment for $3 million realizing a total gain of $4 million before any gains on foreign currency translation.  Varel is the parent to Varel International Ltd., a Carrolton, TX based designer, manufacturer and worldwide distributor of roller-cone and polycrystalline diamond compact drill bits for the oil and gas and mining industries.  American Capital earned a 23% compounded annual rate of return on its total investment, including interest and fees earned over the life of American Capital’s investment.  The proceeds received by American Capital were greater than the third quarter 2007 valuation of the investment by $1 million, or 2%. 

In October 2006, American Capital invested $50 million in the recapitalization of Varel.  American Capital’s investment took the form of a senior unirate loan and junior subordinated debt with warrants.  In March 2007, American Capital made a subsequent $16 million investment in Varel to support its acquisition of Pendemak Industries Ltd., Varel’s exclusive distributor in Canada.  American Capital’s add-on investment consisted of a senior unirate loan.  KRG Capital Partners was the majority owner of Varel. 

“Varel was another great investment for the American Capital Energy Group,” said Kevin Kuykendall, Managing Director, American Capital Energy Group.  “Since our initial investment in 2006, the company quickly exceeded expectations and afforded us the opportunity to provide financing again eight months later during its add-on acquisition of Pendemak.  We’re happy to have had the opportunity to support the company in its growth as well as work with our long-time private equity partner, KRG Capital Partners.”          

For more information about the Varel investments, click here.

BarrierSafe Solutions International Inc.
In the fourth quarter of 2007, American Capital realized full repayment of its $69 million debt investment in BarrierSafe Solutions International Inc., including payment-in-kind interest.  BarrierSafe is a leading developer and marketer of disposable gloves and related products.  American Capital earned a 19% compounded annual rate of return on its total investment, including interest and fees earned over the life of American Capital’s investment.   

In September 2004, American Capital invested $65 million to support the merger of Microflex Corporation and FoodHandler Inc. to create BarrierSafe.  The merger was led by BarrierSafe’s majority owners, Riverside Partners and StoneCreek Capital.  American Capital's investment took the form of a senior term loan and senior subordinated debt. 
“Our investment in BarrierSafe allowed us the opportunity to work with two private equity sponsors, Riverside Partners and StoneCreek Capital, who came to us to support the attractive merger of two leaders in the disposable glove industry.  We’re pleased to have been a part of creating a stronger niche player in the industry,” said Frank Do, Managing Director, American Capital Buyout Group.  

For more information about the BarrierSafe investment, click here.

Breeze Industrial Products Corporation
In the fourth quarter of 2007, American Capital realized full repayment of its $53 million debt investment in Breeze Industrial Products Corporation, a leading global supplier of steel clamps.  American Capital earned a 16% compounded annual rate of return on its total investment, including interest and fees earned over the life of American Capital’s investment. 

In August 2004, American Capital invested $12 million in senior and junior subordinated debt to support Wind Point Partners’ acquisition of Breeze.  In August 2006, American Capital invested an additional $52 million in senior second lien loan, senior subordinated debt and holding company subordinated debt to support Breeze’s dividend recapitalization including the repayment of American Capital’s initial $12 million of debt investments.  

“Our previous investments in Breeze Industrial Products illustrate American Capital’s support of its portfolio companies and private equity sponsors through multiple investments,” said Bowen Diehl, Managing Director, American Capital Sponsor Finance Group.  “In this particular case, we had the opportunity to work with Wind Point Partners, providing financing in two separate instances to support another successful portfolio company.  Since our investment in 2004, Breeze has grown nicely through the implementation of strategic growth and business improvement initiatives and we’re pleased to have been a part of this growth.”   

For more information about the Breeze investments, click here.

Trigeant Ltd.
In the fourth quarter of 2007, American Capital realized a full exit of its $22 million debt investment in Trigeant Ltd., a leading refiner of heavy and sour crude stock into asphalt.  American Capital earned a 29% compounded annual rate of return on its total investment, including interest and fees earned over the life of American Capital’s investment. 

In December 2006, American Capital invested $22 million in senior secured term loans in a recapitalization of Trigeant. 

“Our investment in Trigeant was indicative of the array of situations in which the American Capital Special Situations Group provides critical and flexible capital under tight turnaround times,” said David McReynolds, Principal, American Capital Special Situations Group.  “We’re pleased with the results of our $22 million debt investment in Trigeant, which we were able to exit in only one year.”

For more information about the Trigeant investment, click here.

Portfolio Company
In the fourth quarter of 2007, American Capital sold its senior and junior subordinated debt investments in a portfolio company with a principal balance of $20 million for $10 million of cash and a minority equity interest in the portfolio company.  As a result of the transaction, American Capital realized a $9 million loss in the fourth quarter of 2007.  American Capital earned a negative 10% compounded annual rate of return on its total investment, including interest and fees earned over the life of American Capital’s investment.  The proceeds received by American Capital were greater than the third quarter 2007 valuation of the investment by $6 million, or 167%. 

New Starcom Holdings Inc.
In the fourth quarter of 2007, American Capital realized a loss of $43 million on its investment in New Starcom Holdings Inc., a provider of design, integration and installation services for commercial electrical, telecommunications and computer networking systems.  During the fourth quarter, New Starcom sold one of its operating subsidiaries and ceased all of its other operations.  American Capital earned a negative 24% compounded annual rate of return on its total 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 2007 valuation of the investment by $1 million, or 100%. 

American Capital invested in an entity that subsequently became a subsidiary of New Starcom in December 1998 with a $16.5 million investment in subordinated debt and equity.  American Capital made a subsequent $6.6 million subordinated debt and equity investment in this subsidiary in June 1999 to support its acquisitions of two leading private companies in the electrical services industry.  In June 2003, American Capital purchased the existing senior debt of New Starcom at a discount to face for a total purchase price of $11.5 million.  In 2007, American Capital invested an additional $11 million in New Starcom for working capital purposes.

For more information about the New Starcom investments, click here.

Stravina Holdings Inc.
In the fourth quarter of 2007, American Capital realized a loss of $44 million on its investment in Stravina Holdings Inc., a designer and supplier of impulse-purchase novelty and souvenir items.  During the fourth quarter, Stravina initiated an assignment of its assets for the benefit of its creditors, which is an out of court liquidation process.  American Capital received $2 million of sale proceeds in the fourth quarter and expects to receive a minimal amount of proceeds from the liquidation of the remaining assets of Stravina.  American Capital wrote off all its debt and equity investments in the fourth quarter with the exception of a senior debt investment for which it expects to receive payments from the additional liquidation proceeds.  The debt and equity investments written off in the fourth quarter had a fair value of zero at the end of the third quarter of 2007.  American Capital earned a negative 42% compounded annual rate of return on its total investment, including interest and fees earned over the life of American Capital’s investment.

American Capital first invested in Stravina in May 2002, supporting Blue Capital Management LLC's acquisition with a $19.5 million senior subordinated debt and common equity investment.  In August 2003, American Capital made an additional $7.5 million senior subordinated debt investment to support the Company's acquisition of Hanover Accessories, a designer and marketer of children's jewelry and hair accessories, pet accessories and novelty products.  In April 2005, American Capital made an additional $40 million investment in Stravina, purchasing the senior debt of Stravina, committing to a senior term loan and providing a revolving credit facility.

For more information about the Stravina investments, click here.

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For a chart showing American Capital’s exited portfolio companies, click here

ABOUT AMERICAN CAPITAL

American Capital is the only alternative asset management company that is a member of the S&P 500. With $19 billion in capital resources under management, American Capital is the largest U.S. publicly traded private equity fund and one of the largest publicly traded alternative asset managers.  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 $800 million per company in North America and €5 million to €500 million per company in Europe.

As of December 31, 2007, American Capital shareholders have enjoyed a total return of 453% since the Company's IPO—an annualized return of 18%, assuming reinvestment of dividends.  American Capital has paid a total of $2.1 billion in dividends and paid or declared $27.17 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.