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Over $2.7 billion invested, $429 million in dividends paid since 1997 IPO.
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Vol. 5 No. 1
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(800) 248-9340
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March 2004
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$72 MILLION EQUITY OFFERING
$397 MILLION SECURITIZATION
CAPITAL RESOURCES OVER $2.5 BILLION
$2.79 IN DIVIDENDS PAID OR DECLARED IN 2003; $0.70 DIVIDEND DECLARED FOR Q1 2004
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Table of Contents
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American Capital Completes $72 Million Equity Offering, $397 Million Securitization
$2.79 in Dividends Paid or Declared in 2003; $0.70 Dividend Declared for Q1 2004
New Investments
$70.5 Million in Buyout of Kester, Northrop Grumman Division,
Leading Global Supplier of Assembly Materials to the Electronic Assembly, Component,
Electrical and Industrial Marketplace
$21.6 Million in Nivel Parts & Manufacturing Company, LLC, Distributor of Aftermarket
Golf Car Replacement Parts and Accessories
$22.75 Million in The Hygenic Corporation, Manufacturer & Marketer of Healthcare and
Fitness Products
$68 Million in Specialty Brands of America, Inc., Branded Specialty Foods Company
$58 Million in 3SI Security Systems, Global Provider of Bank Security Products
$62.5 Million in nSpired Natural Foods, Inc., Natural & Organic Food Company
$24.2 Million in Bankruptcy Management Solutions, Provider of Bankruptcy Case
Management Software
$42.5 Million Total Investment in Portfolio Company Chronic Care Solutions
Exit Events
Plastech Engineered Products, Inc.: 27% Total Return on Subordinated Debt
MATCOM: $0.6 Million Gain, 24% Compounded Annual Return
TransCore: $1.7 Million Gain, 21% Compounded Annual Return
California Pellet Mill: $6 Million Gain, 52% Compounded Annual Return
American Capital Regional Diversification
American Capital Investment Partners
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American Capital Completes $72 Million Equity Offering, $397 Million Securitization
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$72 Million Equity Offering
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In February, American Capital announced it had sold 1.89 million shares of common stock to the public at $33.04 per share for total gross proceeds of approximately $62.4 million. UBS Securities LLC was the sole book-running manager for the offering. Friedman, Billings, Ramsey & Co., Inc. and RBC Capital Markets Corporation acted as co-managers of the offering. The underwriters exercised an option to purchase an additional 283,500 shares at $33.04 per share for total proceeds to American Capital of approximately $72 million to cover over-allotments.
Substantially all of the net proceeds of the offering will be applied to reduce the borrowings under American Capital's existing revolving credit facility. This will create availability under this facility, which will generally be available for funding future American Capital investments.
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$397 Million Securitization
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In December, ACAS Business Loan Trust 2003-2, a wholly-owned affiliate of American Capital, issued approximately $318 million of investment grade notes backed by approximately $397 million of senior and subordinated business loans originated by American Capital. Wachovia Capital Markets, LLC acted as the lead manager, structuring and placement agent and initial purchaser of the securities. BB&T Capital Markets and Harris Nesbitt Corp. were co-managers.
American Capital and subsidiaries raised $1.1 billion in capital in 2003 including $558 million during the fourth quarter. The private placement is American Capital's fifth term debt securitization. These securitizations are on-balance sheet financings for American Capital.
The private placement note offering to investors consisted of $258 million Class A notes, $40 million Class B notes and $20 million Class C notes. American Capital retained $40 million of Class D notes and $40 million of Class E notes. The A, B and C class notes were rated by three rating agencies and the Class D notes were rated by Fitch.
| Class Of Note |
$ (000) |
S&P |
Moody's |
Fitch |
| A |
$258,000 |
AAA |
Aaa |
AAA |
| B |
$40,000 |
AA |
Aa1 |
AA |
| C |
$20,000 |
A |
A1 |
A+ |
| D |
$40,000 |
NR |
NR |
BBB |
| E |
$40,000 |
NR |
NR |
NR |
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The Class A notes were priced at LIBOR plus 48 basis points; the Class B notes were priced at LIBOR plus 95 basis points; and the Class C notes were priced at LIBOR plus 175 basis points. The all-in-cost of debt, including interest rate swaps and fees, is 4.8%, which is a lower cost than any of American Capital's prior securitizations.
Moody's, S&P & Fitch Ratings:
Triple A and Double A increased from 70% to 75%
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12/03 |
5/03 |
| Aaa/AAA/AAA |
65% |
60% |
| Aa2/AA/AA |
10% |
10% |
| A1/A/A+ |
5% |
7.5% |
| Retained by ACAS |
20% |
22.5% |
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$2.79 in Dividends Paid or Declared in 2003; $0.70 Dividend Declared for Q1 2004
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In December, American Capital declared an additional dividend on its common stock of $0.06 per share, payable on January 12, 2004 to shareholders of record as of December 31, 2003. Total dividends declared for 2003 were $2.79 per share, an increase of 9% over 2002.
In February, American Capital declared a first quarter 2004 dividend of $0.70 per share, payable on March 31, 2004 to record holders as of February 24, 2004. This dividend is a 4% increase over the first quarter 2003 regular dividend of $0.67 per share and our twenty sixth consecutive quarterly dividend. American Capital has paid a total of $429 million in dividends, and paid or declared $13.82 in dividends per share since its August 1997 IPO at $15.00 per share.
Click here for more information about American Capital's dividends
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$70.5 Million in Buyout of Kester, Northrop Grumman Division, Leading Global Supplier of Assembly Materials to the Electronic Assembly, Component, Electrical and Industrial Marketplace
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 In February, American Capital invested $70.5 million in the buyout of Kester, a division of Northrop Grumman Corporation's (NYSE: NOC) Component Technologies sector and a leading global supplier of assembly materials to the electronic assembly, component, electrical and industrial marketplace. American Capital's investment took the form of a revolving credit facility, senior term loans, senior and junior subordinated debt and preferred and common equity issued by the acquiring company, of which American Capital is an 84% shareholder. The acquiring company paid $60.0 million for the purchase of Kester. The remaining ownership in the acquiring company represents amounts under the employee options program as well as equity co-investors.
"American Capital's investment in Kester demonstrates several of our strengths: our buyout expertise, one-stop buyout capability, and our ability to execute a corporate spin-off," said American Capital COO Ira Wagner.
Founded in 1899 with world headquarters in Des Plaines, IL, Kester is a leading global supplier of high quality solder and solder derivative products for electronic assembly. Kester's wide range of products include an array of basic and high-tech attachment materials, including traditional soldering chemicals, bar and wire solder and paste products and advanced products such as epoxies, polymers, encapsulants, preforms, thermal management materials, precision solder columns and micro-spheres. The company's products serve over 1,200 customers in the automotive, computer, communication, consumer, medical, industrial, electronic, semiconductor packaging, outsourced packaging and components industries. Customers include some of the world's best known blue chip companies. Through its rigorous and well-designed research and development efforts, Kester has been awarded Intel's prestigious Supplier Continuous Quality Improvement Award for four consecutive years. Kester's global footprint encompasses nine facilities located in Illinois, Canada, Brazil, Germany, Singapore, Malaysia, Japan and Taiwan.
Click here for more information about Kester.
Contact Ian Larkin, Principal or call (312) 681-7400.
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$21.6 Million in Nivel Parts & Manufacturing Company, LLC, Distributor of Aftermarket Golf Car Replacement Parts and Accessories
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 In February, American Capital invested $21.6 million in Nivel Parts & Manufacturing Co., the largest independent distributor of aftermarket golf car replacement parts and accessories. American Capital's investment took the form of a revolving credit facility, senior secured term loans, junior and senior secured subordinated debt with warrants and redeemable preferred and common equity. The investment supported the acquisition of Nivel by a company controlled by Sentinel Capital Partners from KODA Enterprises Group. Nivel management invested in redeemable preferred and common equity. American Capital owns approximately 11% of Nivel on a fully diluted basis.
Founded in 1968, Jacksonville, FL headquartered Nivel is a one-stop shop for golf car replacement parts, offering the broadest selection of parts for all major manufacturers' cars. Nivel carries over 2,800 SKUs, including accessories, battery parts, bearings, seals, o-rings, brake parts, chargers, motor and engine parts, gaskets, solenoids, springs, switches and tires. The company distributes golf car parts exclusively to independent and franchise golf car dealers throughout the US and internationally. In addition to its distribution business, Nivel publishes Golf Car News, a bi-monthly industry magazine targeted at golf car dealers and The Cart Trader, a classified newsletter for buyers and sellers of used golf cars. The Company has grown sales at a compound annual growth rate of over 10% since 2000.
Click here for more information about Nivel.
Contact Brian Graff, Principal and Managing Director or call (212) 213-2009.
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$22.75 Million in The Hygenic Corporation, Manufacturer & Marketer of Healthcare and Fitness Products
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 In January, American Capital invested $22.75 million to support the acquisition of The Hygenic Corporation, a leading manufacturer and marketer of branded and private label healthcare and fitness products. American Capital's investment took the form of senior secured subordinated notes and preferred and common equity. Baird Capital Partners is the majority owner. Antares Capital Corporation and Madison Capital Funding LLC provided a revolving credit facility and invested in senior term debt and preferred and common equity. Hygenic management made a significant investment in the equity. American Capital owns a significant minority position in Hygenic on a fully-diluted basis.
Founded in 1925, Akron, OH-based Hygenic's broad manufacturing capabilities in Akron and Malaysia allow it to manufacture an extensive range of products. Its approximately 500 employees produce and distribute resistive exercise bands and tubing, exercise balls, exercise mats and aquatic products under the Thera-Band®, Dyna-Band®, AquafinsTM and Parabath® brands as well as healthcare and specialty products such as disposable tourniquet straps, medical and laboratory tubing and dental dams for use in oral surgery and other endodontic procedures.
Click here for more information about Hygenic.
Contact L. Thomas Gregory, Principal and Managing Director, or call (312) 681-7400.
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$68 Million in Specialty Brands of America, Inc., Branded Specialty Foods Company
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 In December, American Capital invested $68 million in the buyout of Specialty Brands of America, Inc., a leading specialty grocery packaged goods company. American Capital's investment took the form of senior term debt, senior and junior subordinated debt, redeemable preferred stock and common equity. American Capital also provided a revolving credit facility. SBA management made a significant equity investment. American Capital owns 77.5% of SBA on a fully diluted basis.
SBA is the leading marketer of maple syrup and sugar free syrups worldwide, with the Spring Tree®, Cary's®, and MacDonaldsTM brands. SBA also markets Original Trenton Crackers®, Dixie Fry® Coating Mix, New York Flatbreads®, and Canoleo® Margarine. Founded in 1991 and based in Westbury, NY, SBA has built a leading branded specialty foods company through acquisitions and internal growth. The company has seen consistent earnings growth of approximately 12% annually over the past several years. SBA entered the syrup category by acquiring from Borden Inc. the leading U.S. sugar free table syrup brands, Cary's® Sugar Free Syrup and Cary's® and MacDonald'sTM pure maple syrup. The company subsequently acquired Spring Tree Corporation, and with it, obtained the leading pure maple syrup brand in the U.S., Spring Tree® Pure Maple Syrup and the rapidly growing Spring Tree® Low Calorie Sugar Free Syrup. SBA's syrups can be found in the U.S. in just about every grocery store, in the leading breakfast restaurant chains, and in 18 countries. The company's other brands include Original Trenton Crackers®, a 150-year old line of distinctive oyster and wine crackers; Dixie Fry®, a brand of chicken and fish coating mix; Canoleo®, a canola oil based margarine; and New York Flatbreads®, a unique and delicious crispbread distributed nationwide in retail stores and upscale restaurants. The Company's customers include all of the leading retailers and wholesalers in the U.S.
Click here for more information about Specialty Brands of America.
Contact Brian Graff, Principal and Managing Director or call (212) 213-2009.
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$58 Million in 3SI Security Systems, Global Provider of Bank Security Products
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 In December, American Capital invested $58 million in the buyout of its portfolio company 3SI Security Systems from Lincolnshire Equity Fund II. 3SI is the dominant global provider of security solutions utilizing tear-gas and dye-based staining to protect currency from theft in banks, safes, ATMs and across the pavement applications. American Capital's investment took the form of a senior term loan, junior and senior subordinated debt and common equity, and completely refinanced American Capital's original subordinated debt investment of $13 million. Also as part of the buyout, American Capital exchanged its original 6% common stock warrant investment in 3SI with a cost basis of $0.6 million for common stock of 3SI. American Capital now owns approximately 86% of 3SI on a fully diluted basis. Union Bank of California, NA provided a revolving credit facility and senior term loans.
American Capital first invested in 3SI, with global headquarters in Exton, PA, in July 2002, supporting Lincolnshire Equity Fund II's acquisition. Operating for over 30 years, 3SI employs over 150 in its two US facilities in Pennsylvania and Georgia and one European facility in Belgium. The company has recorded revenue growth for 14 consecutive years. 3SI's leading security solutions serve numerous financial institutions worldwide: 86 of the top 100 banks in the U.S. and 24 of the top 50 banks in Europe use 3SI products.
Click here for more information about 3SI.
Contact Jeri Harman, Principal and Managing Director, or call (818) 676-1222.
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$62.5 Million in nSpired Natural Foods, Natural & Organic Food Company
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 In December, American Capital invested $62.5 million in the buyout of nSpired® Natural Foods Inc., a leading natural and organic food products company. American Capital's investment took the form of a revolving credit facility, senior term loans, senior and junior subordinated debt and preferred and common equity. American Capital owns 78% of nSpired on a fully diluted basis.
Founded in 1998, nSpired is manufacturer, packager and seller of natural and organic foods, including nut butters, salty snacks, candy and confections, culinary oils and specialty snacks. Headquartered in San Leandro, CA, nSpired has four additional distribution, manufacturing and warehouse facilities in Oregon and Washington, and has doubled sales in the past two years. With top selling brands such as MaranathaTM, Tropical Source®, Cloud Nine®, Sunspire® and Skinny®, nSpired has recorded significant revenue growth in recent years. nSpired products can be found in prominent retailers such Trader Joe's, Whole Foods, Costco and Safeway.
Click here for more information about nSpired.
Contact Ian Larkin, Principal or call (312) 681-7400.
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$24.2 Million in Bankruptcy Management Solutions, Inc., Provider of Bankruptcy Case Management Software
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 In December, American Capital invested $24.2 million in Bankruptcy Management Solutions, the leading provider of case management software, financial and other services to Chapter 7 bankruptcy trustees. American Capital's investment took the form of senior term notes, senior and junior subordinated debt with warrants, and common equity. American Capital also provided a revolving credit facility. Wachovia Securities also invested in senior term notes. Lincolnshire Management Inc. is the equity sponsor, and acquired the business from J.P. Morgan Chase & Co. BMS management also invested in the equity.
Chapter 7 is a provision of the federal Bankruptcy Code under which the debtor's assets are liquidated and the resulting cash proceeds used to pay creditors. It accounts for 70% of all bankruptcy filings in the United States. BMS provides Chapter 7 bankruptcy trustees with comprehensive systems, including computer hardware, software, help desk services, financial services and other services. BMS systems allow trustees to manage financial assets and meet fiduciary obligations as well as the extensive administrative requirements associated with the almost 100 different bankruptcy courts in the U.S., each of whom may have different, changing requirements. BMS is headquartered in Irvine, CA.
Click here for more information about BMS.
Contact Jeri Harman, Principal and Managing Director, or call (818) 676-1222.
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$42.5 Million Total Investment in Portfolio Company Chronic Care Solutions
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 In February, American Capital made an additional $3.5 million investment in its portfolio company Chronic Care Solutions, Inc. to support the acquisition of Secure Care, Inc., taking the form of senior subordinated debt. This brings American Capital's total current investment in Chronic Care to $42.5 million. KRG Capital Partners is the majority owner and equity sponsor of Chronic Care.
American Capital first invested in Chronic Care in November 2003, supporting the recapitalization and a complementary add-on acquisition led by KRG Capital. Founded in 1994, Clearwater, FL-based Chronic Care Solutions serves patients in the United States and Puerto Rico under the business names Diabetic Supply of USA, Respiratory Supply of USA, Rx Supply of USA, and Ostomy Supply of USA. The Company sells a full line of diabetic, respiratory, ostomy and urological products, including glucose meters, test strips, lancets, insulin pumps, inhalers and nebulizers, all of which are high quality branded products from leading manufacturers such as Johnson & Johnson, Roche and Bayer, and serve a customer base of approximately 70,000 patients. Chronic Care also has a mail-order pharmacy, licensed in all 50 states, that provides its patients with a full line of prescription drugs.
Founded in 1995, Savannah, GA-headquartered Secure Care, Inc. is a direct-to-consumer provider of insulin pumps and insulin pump supplies, diabetic supplies and some pharmacy prescription items. Secure Care distributes its products to customers located primarily in the Southeast United States and serves a customer base of over 9,000. This acquisition is expected to enhance Chronic Care's insulin pump offering as well as broaden the Company's customer base.
Click here for more information about Chronic Care.
Contact Darin Winn, Principal and Managing Director, or call (214) 273-6650.
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Plastech Engineered Products, Inc.: 27% Total Return on Subordinated Debt
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In February, Plastech Engineered Products Inc. prepaid American Capital's remaining subordinated debt investment, together with accrued interest and fees. Plastech prepaid $20 million of the original $30 million subordinated debt investment in the first quarter of 2003, resulting in a $1.6 million realized gain. In the first quarter of 2004, Plastech has prepaid the remaining $10 million subordinated debt investment, resulting in an additional $0.7 million realized gain. American Capital earned a 27% total return on its $30 million subordinated debt investment, including interest and fees received over the life of American Capital's investment. Plastech's repayment occurred as part of an acquisition and recapitalization. American Capital retains its warrants for common stock representing a 2% diluted ownership of the company.
In November 2001, American Capital invested $30 million in senior subordinated debt in Plastech. Headquartered in Dearborn, MI, Plastech is a privately-held leading Tier I automotive supplier. With annual anticipated sales in excess of $1 billion, Plastech becomes one of the four largest injection molders in North America.
Click here for more information about Plastech.
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MATCOM: $0.6 Million Gain, 24% Compounded Annual Return
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In February, American Capital exited its investment in MATCOM International Corporation. The exit results from the sale of MATCOM to SI International Inc. (Nasdaq: SINT), an information technology, network solutions, and systems engineering (IT) company. American Capital received a total of $15 million from the transaction to repay its senior debt and subordinated debt and purchase its common stock warrants, resulting in a $0.6 million realized gain and a 24% compounded annual rate of return on its investment. The 24% return includes the $0.6 million realized gain and the interest and fees received over the life of American Capital's investment in the company. The amount realized by American Capital exceeded the third quarter 2003 valuation of the investment by $0.6 million.
In November 2002 American Capital invested $15 million in MATCOM, a defense contractor and provider of IT and engineering services to various military and civilian agencies of the Federal Government, including the Department of Defense, U.S. Air Force, Department of Homeland Security, Federal Retirement Thrift Investment Board, National Institute of Health, and Department of Justice.
For more information on the MATCOM exit.
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TransCore: $1.7 Million Gain, 21% Compounded Annual Return
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In January, American Capital was repaid its $27 million subordinated debt investment in TransCore Holdings Inc., earning a $1.7 million realized gain and a 21% compounded annual return. TransCore's subordinated debt has been recapitalized by existing senior lenders. American Capital retains its warrant and preferred equity investments representing an approximately 8% ownership interest in TransCore.
TransCore is a technology-based transportation services company with leading market positions in toll collection, traffic management, asset tracking and freight management. American Capital initially invested $7.3 million in subordinated debt with warrants and preferred stock in September 1999 to support the acquisition of TransCore by management and KRG Capital Partners. In June 2000, American Capital also invested $20.2 million in subordinated debt with warrants and preferred stock to support TransCore's acquisition of Amtech, Inc. In February 2001, American Capital invested approximately $2 million in TransCore's acquisition of DAT Services.
For more information on the TransCore exit.
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California Pellet Mill: $6 Million Gain, 52% Compounded Annual Return
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In December, American Capital exited its investment in California Pellet Mill. The exit resulted from the sale of the company on December 31, 2003. American Capital received total proceeds of $30 million upon the exit, earning a 52% compounded annual rate of return on its investment in a senior term loan, senior subordinated notes and 10% equity interest. The 52% return includes the realized gain and the interest and fees received over the life of American Capital's investment in the company. The sale proceeds recognized by American Capital include proceeds to be held in escrow to secure standard representations and warranties of the sale of approximately $0.5 million. The amount realized by American Capital exceeded the third quarter 2003 valuation of the investment by $2.7 million.
In February 2003, American Capital invested $24.3 million to support The Compass Group's recapitalization of California Pellet Mill, the world's leading supplier of process machinery for the animal feed and oilseed processing industries.
For more information on the California Pellet Mill exit.
Click here for a chart detailing American Capital's capital gains and losses.
Click here for a chart listing American Capital's exited companies.
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American Capital Regional Diversification
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American Capital Investment Partners
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Senior
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| AmSouth Capital Corporation |
Huntington National Bank |
| Antares Capital |
ING Capital |
| Bank of America |
J.P. Morgan Chase & Co. |
| Bank of New York |
Key Bank |
| BNP Paribas |
LaSalle Bank |
| Citicorp |
Madison Capital |
| Credit Agricole Indosuez |
Merrill Lynch Capital |
| CS First Boston |
National City Bank |
| Fleet Capital |
PNC Bank |
| GE Capital |
Provident Bank |
| Gladstone Capital |
Union Bank of California |
| GMAC Business Credit |
US Bancorp |
| GMAC-RFC Health Capital |
Wachovia/First Union |
| Harris Bank |
Wells Fargo |
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Mezzanine
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| AIG |
John Hancock |
| Albion Alliance |
Mass Mutual Life Insurance Company |
| Allied Capital |
Reliastar |
| Audax Mezzanine Fund |
Stratford Capital Partners |
| Churchill ESOP Partners |
TIAA-CREF |
| Credit Agricole Indosuez |
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Equity
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| Bain Capital |
Great Hill Partners |
| Bear Stearns Merchant Banking |
Growth Capital Partners |
| Blue Capital Management |
GTCR |
| Booth Creek Capital |
J.P. Morgan Chase & Co. |
| Brentwood Associates |
Keystone Holdings |
| Caltius Capital |
Kohlberg & Co. |
| Cambridge Capital |
KRG Capital Partners |
| Carousel Capital |
Liberty Partners |
| Celerity Partners |
Lincolnshire Management |
| Centre Partners |
Mellon Ventures |
| Charles River Capital Partners |
Monterey Capital Partners |
| Charterhouse Group International |
Morgenthaler |
| Churchill Equity Partners |
RFE Investments |
| ClearLight Partners |
Roark Capital Group |
| Compass Group |
Sentinel Capital Partners |
| Demuth, Folger & Wetherhill |
Sterling Ventures |
| Engles Urso Follmer |
Stratford Capital Partners |
| Exeter Capital Partners |
TMB Industries |
| Fenway Partners |
Westbury Capital Partners |
| George K. Baum Capital Partners |
Weston Presidio Capital |
| Graham Partners |
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here to learn more about American Capital transactions or
here to contact someone at American Capital.
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This newsletter 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
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Two Bethesda Metro Center
14th Floor
Bethesda, MD 20814
Phone: (301) 951-6122
Fax: (301) 654-6714
Info@AmericanCapital.com
www.AmericanCapital.com
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