MCG Capital Announces $40.5 Million Sale of Equity Investment in LMS Intellibound Group, Inc.

ARLINGTON, Va., Feb. 27 /PRNewswire-FirstCall/ -- MCG Capital Corporation (NASDAQ: MCGC) announced today that it sold its equity investment in LMS Intellibound Group, Inc. ("LMS") for $40.5 million and provided debt financing to support the acquisition of LMS by MSouth Equity Partners, L.P. MCG Capital's net cash proceeds after providing additional financing were $21.6 million, with an additional $5 million of proceeds expected upon completion of the transfer of collateral to MCG Capital's 2006-1 term securitization facility. MCG Capital expects additional liquidity after syndicating a portion of the loan. In May 2007, MCG Capital made its original $19.7 million equity investment in and provided debt financing to LMS. The cost and fair value of MCG Capital's equity investment in LMS as of September 30, 2008 was $23.1 million and $36.4 million, respectively.

"MCG Capital has enjoyed working with the management team of LMS, which has done a terrific job of building a strong platform for future growth," said Bill Ford, Managing Director at MCG Capital. "We look forward to our continued involvement as a lender to LMS."

"This $40.5 million equity sale, completed at an 11% premium to the previously-reported fair value of our LMS equity investment, is another step forward in our strategic plan to preserve liquidity and deleverage the balance sheet as we monetize assets at or near their fair value," said Steven F. Tunney, MCG Capital's President and CEO. "Since we began our deleveraging initiatives in July 2008, MCG Capital has completed a total of $156.3 million in investment monetizations at 100.1% of their previously-reported fair value."

LMS is a nationwide provider of outsourced managed labor services, primarily to the grocery and food service sectors.

About MCG Capital Corporation

MCG Capital Corporation is a solutions-focused commercial finance company providing capital and advisory services to middle-market companies throughout the United States. Our investment objective is to achieve current income and capital gains. Our capital is generally used by our portfolio companies to finance acquisitions, recapitalizations, buyouts, organic growth and working capital. For more information, please visit www.mcgcapital.com.

Forward-looking Statements:

Statements in this press release regarding management's future expectations, beliefs, intentions, goals, strategies, plans or prospects, including statements relating to MCG's current strategic plan, including the preservation of liquidity and deleveraging its balance sheet, its ability to monetize assets at or near their fair value, its ability to transfer collateral to its 2006-1 term securitization, and its ability to syndicate the loan to LMS may constitute forward-looking statements for purposes of the safe harbor protection under applicable securities laws. Forward-looking statements can be identified by terminology such as "anticipate," "believe," "could," "could increase the likelihood," "estimate," "expect," "intend," "is planned," "may," "should," "will," "will enable," "would be expected," "look forward," "may provide," "would" or similar terms, variations of such terms or the negative of those terms. Such forward-looking statements involve known and unknown risks, uncertainties and other factors including those risks, uncertainties and factors referred to in MCG's Quarterly Report on Form 10-Q for the quarter ended September 30, 2008 filed with the Securities and Exchange Commission under the section "Risk Factors," as well as other documents that may be filed by MCG from time to time with the Securities and Exchange Commission. As a result of such risks, uncertainties and factors, actual results may differ materially from any future results, performance or achievements discussed in or implied by the forward-looking statements contained herein. MCG is providing the information in this press release as of this date and assumes no obligations to update the information included in this press release or revise any forward-looking statements, whether as a result of new information, future events or otherwise.