Bethesda, MD - May 22, 2002 - American Capital Strategies Ltd. (Nasdaq:ACAS) announced today that it has invested $13.7 million in American Decorative Surfaces Inc. to fund the purchase of the St. Louis area operation of Decorative Surfaces International Inc. (DSI) from the DSI bankruptcy estate. The investment, in the form of preferred stock, gives American Capital 100% ownership of the company and was predominately used to retire senior debt. The purchase price includes the assumption of $24.5 million of debt owed to American Capital by DSI. American Decorative Surfaces will continue the business of manufacturing decorative paper and vinyl surfacing material for the home and industrial markets. LaSalle National Bank provided $14.3 million of senior debt to American Decorative Surfaces.
"After over a year of work, our ownership has increased from 43% of DSI to 100% of DSI's best facility. Over that time we have substantially increased EBITDA available for debt service, reduced senior debt above us by over $19 million and severely reduced other obligations," explained American Capital Chairman, President and CEO Malon Wilkus. "This is the second portfolio company in which our liens were critical to recovering value through a bankruptcy. We are particularly pleased that the St. Louis business operated in bankruptcy for only 63 days, an extremely short period."
DSI entered bankruptcy on March 19th, 2002, after its Columbus, OH facility, which manufactured commercial wallcoverings, experienced large operating losses. These losses were the result of a dramatic increase in resin and other materials prices, as well as a precipitous drop in sales to the manufactured housing market caused by the depression in that industry . St. Louis, producing different products and operating in substantially different markets, was not significantly impacted by these developments, though sales have been depressed by the recession.
"One of our operating principals, Bob Sharp, spent nearly ten months on site helping DSI revamp its management team, rationalize its cost structure and maximize the value of its assets," said Ira Wagner, American Capital Executive Vice President and COO. "American Capital's Gordon O'Brien, Managing Director, and Michael Ranson, VP, spent months assisting DSI in its successful sale of its Columbus business to reduce debt and eliminate operating losses. The purchase of the on-going operations by American Decorative Surfaces is the final step in a long process that has allowed us to preserve value that might have been lost by other mezzanine lenders."
"American Capital is funding the purchase of a state-of-the-art, two year old facility that is the low-cost producer with excellent market share. It is producing attractive cash flows and is well positioned to grow as the economy improves," observed Gordon O'Brien.
Separately, American Capital reported that the Biddeford Textile business, a manufacturer of electric and conventional blankets, emerged from bankruptcy, conveying title to its manufacturing facility to Biddeford Real Estate Holdings, Inc., a wholly owned portfolio company of American Capital. Prior to the reorganization, American Capital held a first lien on the manufacturing facility as collateral for its loan to Biddeford Textile. Biddeford Real Estate Holdings has entered into a market value five-year lease with Biddeford Acquisition, LLC (BAL). BAL sponsored the reorganization of Biddeford Textile and is a subsidiary of Microlife Corporation, a Taiwanese and Swiss based manufacturer of medical and electronic equipment . A Microlife subsidiary has provided a letter of credit and guarantee for the lease.
"We are pleased to achieve complete recovery of our investment at Biddeford. The annual lease payments on the property that we now own will substantially exceed the interest payments on our original loan to Biddeford. We particularly find it rewarding that the company will return to being the number two supplier of electric blankets in North America," concluded Mr. Wilkus.
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.
