American Capital Restructures $2.4B of Unsecured Debt

BETHESDA, Md. -- American Capital Ltd. (NASDAQ:ACAS) announced today that it has reached an agreement in principle with a steering committee of lenders to restructure its revolving line of credit facility. The Company will be presenting the terms of the proposed restructuring to all of the lenders in its revolving line of credit facility and to the holders of its privately placed term notes and publicly issued bonds for approval. The terms of the agreement in principle are nonbinding and subject to further negotiations, various conditions and final agreements. The Company hopes to complete the restructuring by year end.

"We are pleased to reach this step and believe that the terms provide a basis for a complete restructuring of our $2.4 billion of unsecured debt," said Malon Wilkus, American Capital Chairman and Chief Executive Officer. "Representatives of the holders of the privately placed term notes and publicly issued bonds participated with the bank steering committee and its advisors in certain negotiations with respect to the material terms of the agreement in principle. While the process is not yet complete, we are optimistic that it will soon conclude favorably and we can turn our focus to rebuilding shareholder value."

In addition to the revolving line of credit facility, American Capital's principal unsecured credit facilities include $550 million of publicly issued bonds and $390 million in original principal amount of privately placed term notes. Earlier this year, American Capital breached certain financial covenants under each of the facilities, causing events of default.

Material terms of the agreement in principle, assuming a restructuring of $2.4 billion of unsecured debt, include:

-- Maturity at December 31, 2013
-- Pledge of substantially all the Company's assets as collateral
-- $450 million principal payment due at closing
    -- Current cash on hand is in excess of this amount
-- Annual minimum principal amortization:
   -- $250 million in 2010
   -- $300 million in 2011
   -- $350 million in 2012
   -- $300 million in 2013, prior to maturity
   -- $750 million balance due at maturity

   -- Interest rate to decline as principal is repaid

Outstanding Obligations         Pricing
(Thousands)
-----------------------                  -------
                 >= $1,700,000       Libor + 9.50%
$1,400,000 >= $1,700,000       Libor + 8.50%
$1,000,000 >= $1,400,000       Libor + 6.50%
                   < $1,000,000       Libor + 5.50%

   -- 2% Libor floor
-- Fees based on outstanding balance
   -- 2% at closing
   -- 1% at December 31, 2011 and 2012
   -- Up to 1% annual fee due if specified higher than minimum amortization levels are not met
-- Limit cash dividends to no more than minimum legally required

The Company is filing a term sheet reflecting the agreement in principle with the Securities and Exchange Commission as part of a Current Report on Form 8-K.

ABOUT AMERICAN CAPITAL

American Capital is a publicly traded private equity firm and global asset manager. American Capital, both directly and through its asset management business, originates, underwrites and manages investments in middle market private equity, leveraged finance, real estate and structured products. Founded in 1986, American Capital has $12 billion in capital resources under management and nine offices in the U.S., Europe and Asia. For further information, please refer to www.AmericanCapital.com.