Bethesda, MD - May 20, 2002 - American Capital Strategies Ltd. (Nasdaq:ACAS) announced today that it has invested $31 million to partially finance the asset acquisition of Hartstrings Inc. by Keystone Holdings LLC. Hartstrings is a leading designer, wholesaler and retailer of classic coordinated children's apparel sold under the hartstrings, kitestrings and k.c. parker labels. American Capital is funding a senior term loan, senior revolving credit bridge facility and a subordinated note with warrants.
"Hartstrings is another in a series of mezzanine investments in which American Capital has both supported an equity sponsor and ensured a transaction close by stepping in to the shoes of the senior lender in a very difficult senior lending environment," said American Capital COO Ira Wagner. "We are investing in seasoned management, including Sheila Connelly and Peggy Earle, who are selling a quality niche product through extensive customer and supplier relationships, and partnering with a sponsor with significant industry expertise."
American Capital has invested approximately $500 million in middle market companies in the last twelve months.
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"Hartstrings is a one-of-a-kind children's apparel company," said American Capital Principal Kenneth Jones. "The company's high-end clientele and timeless designs provide continuity and a cushion against recession, and it is disinguished from its competitors by its profitability, service, quality and on-time delivery. Hartstrings' combination of direct sales through its own retail stores, strong presence in over 1,300 specialty shops and relationships with major high-end retailers positions it as a market leader."
Hartstrings was founded in 1980, opening the first of its 21 retail stores in 1986. It now has over 250 employees. Cash flows have risen steadily since 1996. Sales rose during the recent recession, with retail sales up nearly one-third from 1998 to 2001, and its earnings track record has been consistently strong and growing. The company's leading wholesale accounts include Nordstrom, Lord & Taylor, Saks Fifth Avenue and Neiman Marcus.
"American Capital is the ideal investment partner," said new Hartstrings CEO Nicholas DeMarco. "Their flexibility and commitment have provided us with a solid foundation for continuing to grow Hartstrings."
American Capital is a publicly traded buyout and mezzanine fund with capital resources exceeding $1 billion. American Capital is an equity partner in management and employee buyouts; invests in debt and equity of companies led by private equity firms, and provides capital directly to private and small public companies. American Capital funds growth, acquisitions and recapitalizations. The Company has paid and declared $8.98 per share in dividends since going public in 1997.
Companies interested in learning more about American Capital's flexible financing and ability to provide senior debt, subordinated debt and equity should contact Mark Opel, Principal, at (800) 248-9340, or visit our website.This press release contains forward-looking statements. The statements regarding expected results of American Capital Strategies 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 or national economic conditions, or changes in the conditions of the industries in which American Capital has made investments.
