FOR IMMEDIATE RELEASE:
December 7, 2006

Contact
Adam Spence, Principal (212) 213-2009
Dan Cohn-Sfetcu, Vice President (212) 213-2009
Brian Maney, Director, Corporate Communications (301) 951-6122

AMERICAN CAPITAL INVESTS $22 MILLION IN ACQUISITION OF
PORTFOLIO COMPANY JONES STEPHENS

Bethesda, MD - December 7, 2006 - American Capital Strategies Ltd. (Nasdaq:ACAS) announced today that in the third quarter it invested $22 million to support the acquisition of its portfolio company Jones Stephens Corp.  by an affiliate of Cortec Group Fund IV L.P. (“Cortec Group”).  Jones Stephens is a leading designer, assembler and distributor of specialty plumbing components.  American Capital’s investment takes the form of senior and junior subordinated debt.  Jones Stephens’ management invested in the Company’s equity.  

American Capital acquired control of Jones Stephens in November 2003, investing $35 million in subordinated debt and equity.  American Capital received total proceeds of $61 million in the sale of Jones Stephens, realizing a gain of $25 million and earning a 35% compounded annual rate of return on its investment in the Company’s subordinated debt and equity.

“We are delighted to be providing further support for Jones Stephens, a leader in the plumbing fixtures and fittings industry, through our investment in its buyout by the Cortec Group,” said American Capital Regional Managing Director Brian Graff. “Since American Capital’s 2003 investment, Jones Stephens has outperformed our expectations.”

“We are enthusiastically continuing our involvement with the Company and its highly experienced and committed management team.  We also welcome this opportunity to broaden our relationship with Cortec Group,” said American Capital Managing Director Robert Klein.  

American Capital has invested directly and through its funds under management $6.3 billion in the last twelve months, $5.9 billion year to date and $1.4 billion quarter to date.  Not including funds under management, American Capital has invested $4.9 billion in the last twelve months, $4.4 billion year to date and $994 million quarter to date.  For more information about American Capital’s portfolio, click here.

“Jones Stephens stands out in the specialty plumbing components market because of its unique, value-added distribution model, which plays a critical role in the plumbing parts supply chain,” said American Capital Principal Adam Spence.  “The Company’s product offering of nearly 11,000 SKUs, which enables customers to consolidate their purchasing, and its continual introduction of new and improved products developed in response to customer needs provide the company with a compelling competitive advantage.”

“By providing exceptional quality and customer service, Jones Stephen enjoys a loyal customer base and is an important vendor to four major national buying groups.  Its expert management team has demonstrated its ability to manage growth in a leveraged environment,” said American Capital Vice President Dan Cohn-Sfetcu. 

Founded in 1993, Jones Stephens is a leading low-cost, value-added designer, product source, assembler, and distributor of specialty plumbing products.  Its broad product offerings include fittings, gaskets, drains, a variety of tools and specialty decorative items for bathrooms and kitchens.  Except for certain light assembly, all of the Company’s manufacturing is outsourced, much of it to facilities in China, Taiwan and Korea, as well as in the U.S.  The Company sells primarily to wholesalers, but also to retailers and other channels of distribution.  The Company’s headquarters and distribution center are in Moody, AL.  The Company employs over 200.

“We are very excited to have acquired Jones Stephens in partnership with Company management.  We appreciated American Capital’s responsiveness in facilitating the transaction,” added Scott Schafler, the President of Cortec Group.  “Cortec has significant experience in the markets served by Jones Stephens.  We stand ready to support management’s plan to grow the business by investing aggressively in product innovation, expanding sales to existing customers and acquiring new customers.”

For more information about American Capital’s original investment in Jones Stephens, click here.

ABOUT AMERICAN CAPITAL

American Capital is a publicly traded buyout and mezzanine fund with $12 billion in capital resources under management. American Capital invests in and sponsors management and employee buyouts, invests in private equity buyouts, provides capital directly to early stage and mature private and small public companies and through its asset management business is a manager of debt and equity investments in private companies. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions, recapitalizations and securitizations. American Capital invests from $5 million to to $500 million per company.

As of November 30, 2006, American Capital shareholders have enjoyed a total return of 588% since the Company's IPO - an annualized return of 23%, assuming reinvestment of dividends. American Capital has paid a total of $1.3 billion in dividends and paid or declared $22.44 dividends per share since its August 1997 IPO 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.

ABOUT CORTEC GROUP

Cortec Group acquires high value-added, middle-market manufacturing, service and distribution businesses that have achieved leadership positions in their market niches.  Cortec Group Fund IV, L.P. has more than $410 million of committed capital to acquire platform companies with enterprise values of $30 million to $250 million and smaller follow-on acquisitions.

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.

This announcement is neither an offer to sell nor a solicitation to buy securities.
This announcement appears as a matter of record only.

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