FOR IMMEDIATE RELEASE:
December 7, 2006

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

AMERICAN CAPITAL PROVIDES DETAILS OF $46 MILLION OF TOTAL NET REALIZED GAINS IN THIRD QUARTER

Bethesda, MD –-December 7, 2006 - American Capital Strategies Ltd. (Nasdaq:ACAS) announced today the details of $46 million of total net realized gains it recognized from portfolio investments in the third quarter of 2006.  Included in this amount were net realized gains of $106 million from the complete or substantial exit of 13 portfolio companies for total proceeds of $494 million.  Year-to-date through September 30, 2006, American Capital has received total proceeds of $1.4 billion from exits and repayments from portfolio investments, realizing a total net gain of $106 million. 

KAC Holdings Inc.
American Capital previously announced the sale of its portfolio company KAC Holdings Inc., parent to Kester Inc., to Illinois Tool Works Inc. (NYSE: ITW) in the third quarter 2006.  American Capital realized a gain of $47 million from the sale of KAC Holdings and recognized total proceeds of $89 million upon the exit, earning a 53% compounded annual rate of return on its 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 second quarter 2006 valuation of the investment by $2 million, or 2%.  KAC Holdings is a global supplier of solder and other assembly materials to the electronic assembly, component, electrical and industrial marketplace.

“We are extremely delighted with the results of our investment in KAC Holdings, which produced one of American Capital’s largest gains,” said John Neis, American Capital Vice President.  “Following our 2004 buyout of Kester, the Company far exceeded our original projections, having achieved many key objectives.  We believe the Company is well positioned to reap the benefits of its accomplishments.”

For more information about the KAC transaction, click here.

Bankruptcy Management Solutions Inc.
In the third quarter of 2006, American Capital realized a gain of $22 million from the sale of its portfolio company Bankruptcy Management Solutions Inc. (“BMS”) to Charlesbank and Ocwen Financial Corporation.  BMS is a leading provider of case management software, financial and other services to primarily Chapter 7 bankruptcy trustees.  American Capital recognized total proceeds of $68 million upon the exit, earning a 41% compounded annual rate of return on its 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 second quarter 2006 valuation of the investment by $1 million, or 2%.

In December 2003, American Capital invested $24 million in a revolving credit facility, senior term notes, senior and junior subordinated debt with warrants and common equity in BMS, supporting Lincolnshire Management's acquisition.  In December 2004, American Capital invested a subsequent $78 million in the recapitalization of BMS.  American Capital’s additional investment took the form of senior term debt and senior and junior subordinated debt.  Proceeds from that recapitalization were used to refinance existing debt and pay a dividend to the equity holders. As part of BMS' refinancing, American Capital received full repayment of its senior term notes and senior and junior subordinated debt, terminated its revolving credit facility and retained its equity investment.  Since its original investment in BMS, American Capital has realized a total gain of $25 million.

“Our cumulative investments in Bankruptcy Management Solutions were highly successful, resulting in an outstanding return for American Capital,” said Frank Do, American Capital Managing Director.  “A portfolio company since 2003, Bankruptcy Management Solutions has done an excellent job of becoming a stand-alone entity, a result of the direction of strong management team and an experienced private equity sponsor.  We’re delighted to have been a part of its growth.”

For more information about the BMS transaction, click here.

Jones Stephens Corp.
In the third quarter of 2006, American Capital realized a gain of $25 million from the sale of its portfolio company Jones Stephens Corp. to Cortec Group.  American Capital provided $22 million of subordinated debt to finance Cortec’s acquisition of Jones Stephens.  Jones Stephens is a leading designer, assembler and distributor of specialty plumbing components.  American Capital received total proceeds of $61 million upon the exit, earning a 35% compounded annual rate of return on its 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 second quarter 2006 valuation of the investment by $7 million, or 10%.

American Capital originally acquired Jones Stephens in November 2003, investing $35 million in subordinated debt and equity.

“We’re impressed with the success of our buyout investment in Jones Stephens.  Led by an experienced and committed management team, the Company has surpassed our expectations.  We’re also glad that we can reinvest in Jones Stephens as a minority investor with private equity sponsor Cortec, continuing to support the Company’s growth,” said Frank Do, American Capital Managing Director. 

For more information about the Jones Stephens transactions, click here.

Iowa Mold Tooling Co. Inc.
In the third quarter of 2006, American Capital realized a gain of $36 million from the sale of its portfolio company Iowa Mold Tooling Co. Inc. (“IMT”) to Oshkosh Truck Corporation (NYSE: OSK).  IMT is a leading manufacturer of service vehicles, material handling systems and specialty cranes serving the tire, mining, construction, material handling, equipment dealer, railroad and utility markets throughout the world.  American Capital received total proceeds of $95 million upon the exit, earning a 25% compounded annual rate of return on its 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 second quarter 2006 valuation of the investment by $15 million, or 20%.

In October 2000, American Capital invested $32 million in the buyout of IMT.  American Capital’s investment took the form of senior subordinated debt with warrants, junior subordinated debt with warrants and common equity in IMT.  During the recession that followed, American Capital invested an additional $5 million to support an acquisition and for working capital, and ultimately restructured the balance sheet. 

“With the sale of IMT, we are exiting one of our first buyout transactions,” said David Ehrenfest Steinglass, American Capital Senior Vice President, Corporate Development.  “This excellent outcome resulted from close collaboration between the IMT deal team and our operations team.  This cross-functional group brought in a new management team that was able to more than double EBITDA in 18 months, through the implementation of lean manufacturing and other operational improvements” 

For more information about the IMT transaction, click here.

BC Natural Foods LLC
In the third quarter of 2006, American Capital realized a gain of $5 million from the recapitalization and exit of its portfolio company BC Natural Foods LLC (formerly Petaluma Holdings LLC).   BC Natural Foods is a natural and organic meats company.  American Capital recognized total proceeds of $24 million upon the exit, earning a 21% compounded annual rate of return on its 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 second quarter 2006 valuation of the investment by $0.9 million, or 4%. 

In January 2002, American Capital invested $8.5 million in senior subordinated notes to recapitalize BC Natural Foods as part of an acquisition financing led by Booth Creek Management Corporation.  In October 2002, American Capital made a subsequent $18 million investment in the Company to support the acquisition of Coleman Natural Products and B3R Country Meats.  American Capital’s additional investment took the form of senior notes and senior subordinated debt.  In August 2003, American Capital invested an additional $9 million in the Company support the acquisition of the Poultry Meat Division of Pennfield Corp. and Penn Valley Farms/Hans' Sausage.  American Capital's additional investment took the form of senior subordinated debt.     

“We’ve enjoyed working with Booth Creek Management over the past six years, building BC Natural Foods into a leading natural and organic meats company.  Over the years, the Company has significantly transitioned, expanding its geographic reach and product offering to respond to the growing natural and organic foods market,” said Steve Martinez, American Capital Principal.  

For more information about the BC Natural Foods transactions, click here.

AmSan LLC
In the third quarter of 2006, American Capital received full repayment of its $25 million senior debt investment in AmSan LLC.  AmSan is a leading distributor of janitorial and sanitary products to building services contractors, educational, healthcare and hospitality customers.  American Capital earned a 16% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment. 

In June 2005, American Capital invested $25 million in senior term debt in AmSan, supporting AmSan’s recapitalization by GTCR Golder Rauner. 

“We’re delighted with the outcome of our investment in AmSan.  This exit validated our original investment thesis and expectations for AmSan,” said Demian Kircher, American Capital Principal.

For more information about the AmSan transaction, click here.

Continental Structural Plastics Inc.
In the third quarter of 2006, American Capital recognized proceeds of $14 million from the recapitalization and its exit from portfolio company Continental Structural Plastics Inc. (“CSP”).  CSP is a manufacturer of compression-molded, reinforced plastics used in automotive and industrial end-products.  American Capital earned a 15% compounded annual rate of return on its 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 second quarter 2006 valuation of the investment by $0.2 million, or 1%.

In February 2005, American Capital invested $14 million in senior subordinated debt and redeemable preferred and common equity in CSP, supporting Richard L. Scott Investments LLC's and CSP management's acquisition of CSP.

“We are happy to have worked with Richard L. Scott Investments and Continental Structural Plastic’s management team, participating in the Company’s growth.  They have done a great job executing the planned growth strategy,” said Ken Jones, American Capital Principal. 

For more information about the CSP transaction, click here.

IPC Acquisition Corp.
In the third quarter of 2006, American Capital received full repayment of its $8 million senior debt investment in IPC Acquisition Corp.  IPC is a leading provider of mission-critical communications solutions to the world’s largest financial services firms. American Capital earned a 15% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment. 

In September 2005, American Capital provided $8 million of second lien senior term financing to IPC.

Trinity Hospice Inc.
In the third quarter of 2006, American Capital recognized sale proceeds of $20 million from the sale of its portfolio company Trinity Hospice Inc. to Sunrise Senior Living Inc. (NYSE: SRZ).  Trinity is one of the largest providers of hospice care in the United States.  American Capital earned a 12% compounded annual rate of return on its 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 second quarter 2006 valuation of the investment by $0.9 million, or 5%. 

In June 2002, American Capital invested $17 million in a revolving credit facility, senior secured notes and preferred and common equity in Trinity, supporting KRG Capital Partners’ acquisition.      

“Our investment in Trinity was one of several platform investments with our long-term private equity partner KRG Capital Partners.  We wish Trinity’s management team the best under its new ownership,” said Darin Winn, American Capital Regional Managing Director. 

For more information about the Trinity transaction, click here.

Aeriform Corporation
In the third quarter of 2006, American Capital realized a gain of $6 million from the sale of its portfolio company Aeriform Corporation to Airgas Inc. (NYSE:ARG).  Aeriform is an independent distributor of specialty and industrial cylinder gases.  American Capital received $62 million of repayments for its senior and subordinated debt investments in Aeriform.  American Capital continues to have a subordinated debt investment with a fair value of $3 million for which it expects to receive partial payment from sale proceeds held in escrow.  Including the fair value of its remaining subordinated debt investment, American Capital’s total compounded annual rate of return on its investment, including interest, dividends and fees earned over the life of American Capital’s investment is 10%. 

In June 1999, American Capital invested $7.5 million in senior subordinated debt in Aeriform.  In June 2001, American Capital made a subsequent $23 million investment in Aeriform, to finance Aeriform's acquisition of a significant cylinder gas distribution operation from Air Liquide America.  American Capital's additional investment took the form of a senior term loan and senior and junior subordinated debt with warrants. In June 2004, American Capital purchased the existing senior debt at a discount for a total of $18 million.

"We are extremely pleased with the outcome of our investment in Aeriform Corporation.  The sale of Aeriform to Airgas is one of several successful exits this year that demonstrates the value-creating capabilities of American Capital's Operations Team," said Chad Clawson, American Capital Vice President.

For more information about the Aeriform transactions, click here.

Biddeford Real Estate Holdings
In the third quarter of 2006, American Capital received full repayment of its $3 million first mortgage loan from its portfolio company Biddeford Real Estate Holdings upon the sale of Biddeford’s real estate asset.   American Capital earned a 9% compounded annual rate of return on its investment, including interest and fees earned over the life of American Capital’s investment. 

Optima Bus Corporation
In the third quarter of 2006, American Capital realized a loss of $6 million from the sale of its portfolio company Optima Bus Corporation to North American Bus Industries Inc.  Optima is a leading manufacturer of heavy duty small transit buses used for mass transit by municipalities, airports and private operators.  American Capital recognized total proceeds of $25 million upon the exit, earning a 0% compounded annual rate of return on its 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 second quarter 2006 valuation of the investment by $11 million, or 91%.

In March 1998, American Capital originally invested $17 million in senior debt, senior subordinated debt and common and preferred equity in Optima, supporting the employee buyout. Subsequent to its original investment in 1998, American Capital invested an additional $37 million in debt and equity in Optima in support of recapitalizations and working capital needs of Optima.

For more information about the Optima transaction, click here.

Weber Nickel Technologies Limited
In the third quarter of 2006, American Capital realized a loss of $29 million on its investment in Weber Nickel Technologies Limited.  Weber is a designer and manufacturer of large-cavity specialty molds and precision products for the automotive, aerospace and building products industries.  Weber filed for bankruptcy protection in Canada under the Companies Creditors Agreement Act.  Although American Capital is pursuing its claims, it does not expect to receive any proceeds from its investment and wrote off its investment, earning a negative 97% compounded annual rate of return on its investment, including interest, dividends and fees earned over the life of American Capital’s investment.  The investment had a  fair value of zero in the second quarter of 2006.

In October 2004, American Capital invested $24 million in senior subordinated debt and preferred and common equity in the buyout of Weber.

For more information about the Weber transaction, click here.

Other Company Exit and Repayments
In the third quarter of 2006, American Capital sold a portion of its equity investments in five portfolio companies – nSpired Holdings Inc., Halex Holdings Inc., Logex Corporation, KIC Holdings Inc. and Euro-Caribe Packing Company – in one transaction for nominal proceeds realizing a total loss of $42 million.  Each of these investments had a fair value of zero as of the second quarter of 2006. 

American Capital also recognized a net realized loss of $18 million from the exits and prepayments of various other portfolio investments during the third quarter of 2006.

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From its IPO through the third quarter of 2006, American Capital has earned an 18% compounded annual return on 149 exits and prepayments of senior debt, subordinated debt and equity investments, totaling $3.6 billion of invested capital, including interest, dividends, fees and net gains on these investments.  These exits and prepayments represent 31% of all amounts invested by American Capital since its August 1997 IPO. 

For a chart showing American Capital’s realized gains as of the end of Q3 2006, click here.

For a chart showing American Capital’s exited portfolio companies, 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 $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.

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.