American Capital Invests $39M in Halex & Capitol U

Bethesda, MD, January 7--American Capital Strategies Ltd. said that in December 2004 it invested an additional $39 million in its portfolio company Halex Corp. to refinance existing debt and to support the acquisition of Capitol USA, a leading manufacturer and distributor of flooring installation products and accessories. American Capital's investment takes the form of a senior term loan, senior and junior subordinated debt and common equity. American Capital is also providing a revolving credit facility. American Capital's total current investment in Halex is $72 million. The founders of Halex are maintaining their equity investment. We are excited to support the attractive combination of two leaders in the flooring installation industry, creating a stronger and larger diversified flooring product company," said American Capital COO Ira Wagner. "With our additional investment in Halex, we are demonstrating American Capital's capability to fund the entire capital structure of a transaction, dedication to growing our portfolio companies and ability to remain a long-term investment partner, working with management teams to create value." American Capital invested approximately $2 billion in 2004 and approximately $750 million in the fourth quarter of 2004. "Halex's merger with Capitol solidifies its position in the tackstrip and high-end underlayment markets. In addition, the combined entity will be able to leverage its position with its core products to increase the sale of its other products through cross selling efforts and to accelerate penetration of other new markets," said American Capital Managing Director Frank Do. "The combination is also expected to benefit the combined entity in real, identifiable cost savings and synergies, specifically in improved purchasing and distribution capabilities. Furthermore, the Company's combined product offering, which serves the new homes and remodeled homes markets as well as the home repair segment, enables the Company to mitigate the risk of exposure to the cyclicality of the housing and building market." "We're looking forward to working with Halex and Capitol management to build upon both companies' strong positions and expertise in the flooring installation supplies and accessories industry," said American Capital Vice President Bill Bujake. "In addition to diversifying its product and distribution strategies, we also believe that Halex will benefit from the managerial talent at Capitol. Furthermore, we believe Capitol's experience in building and managing brands will be helpful in solidifying and expanding the brand recognition and market presence of Halex's existing brands and products." Dalton, GA-headquartered Capitol USA is a leading manufacturer and distributor of flooring installation products and accessories. Capitol's broad product offering includes carpet tackstrip, plywood underlayment, carpet seaming tape, flooring adhesives, binding tape, carpet paddings and non-slip padding. Capitol has four operating facilities in Georgia and Pennsylvania. In August 2002 American Capital invested $33 million in debt and equity alongside management in a recapitalization of Halex. Founded in 1990, Pomona, CA-headquartered Halex is a leading global manufacturer and distributor of flooring installation supplies, including carpet tackstrips and plywood underlayment. "Our ongoing relationship with American Capital enables us to grow and strengthen our position in the flooring installation market as well as new markets," said Halex President Craig Silvers. "Their understanding of our vision for future growth makes them an excellent partner. With American Capital's continued support in our acquisition of Capitol, Halex is in an even better position to serve our marketplace and can expect to continue to succeed in the years ahead."

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