MCG Capital Corporation (Nasdaq: MCGC) ("MCG" or the "Company") today announced that Richard W. Neu, 55, Chairman of the MCG Board, has been elected as Chief Executive Officer. Mr. Neu succeeds Steven F. Tunney, Sr. who left the Company in order to pursue other interests. The Company also announced the promotion of B. Hagen Saville, currently the Company's Executive Vice President of Business Development, to the position of President and Chief Operating Officer.

Mr. Neu said, "On behalf of the Board, I would like to thank Steve for his leadership, hard work, and devotion to the Company. Beginning at the time that MCG was founded, and continuing through periods of severe economic crisis, Steve has tirelessly sought to create value for our shareholders and to promote the best interests of the Company. I personally look forward to the opportunity to seek to do the same. We wish him success and the best of luck in his future endeavors. We are excited to also recognize Hagen's contributions to the Company in his capacity as our primary investment officer, a role he will continue to fill in addition to his new responsibilities as President and Chief Operating Officer. His deep knowledge of our market, level of engagement and strong relationships with the management teams of our portfolio companies, and connections with our investor base should benefit both the Company and our stockholders." In closing, Mr. Neu stated that "Hagen and I are truly excited to have the opportunity presented to us by our stockholders and the MCG Board of Directors to further our strategy to maximize shareholder value. We expect that this value will be created through the payment of a competitive dividend, a tax efficient staple of the BDC business model, and continued efforts to close the gap between our stock price and net asset value."

Mr. Tunney said, "I have greatly valued my time with MCG, and in particular am grateful for the opportunity to work so closely with the Company's dedicated and talented employees and management team. I am confident that Rick Neu, Hagen and the rest of the team will continue to look after the best interests of MCG's investors while furthering our mission of supporting middle-market companies, and that MCG's stockholders will be in capable hands."

Mr. Neu has been a Director of the Company since 2007, and has been the Chairman of the Company's Board of Directors since April 2009. Mr. Neu is currently the Chairman of the Board of Directors of Dollar Thrifty Automotive Group, Inc. and currently serves on the board of directors and audit committee of Huntington Bancshares Incorporated, and was previously the Chief Financial Officer and Treasurer of Charter One Financial, Inc. from December 1985 to August 2004.

Mr. Saville has been the Company's Executive Vice President of Business Development since March 1998. Prior to joining the Company, Mr. Saville was employed at Signet Bank and First Union National Bank.

Dividend Declaration

MCG also announced today that its board of directors declared a dividend of $0.17 per share for the quarter ended September 30, 2011. The dividend is payable as follows:

Record date: December 15, 2011

Payable date: January 13, 2012

Preliminary Third Quarter 2011 Results

Preliminary results for the quarter ended September 30, 2011 are as follows:
  • Distributable net operating income, or DNOI, for the quarter ended September 30, 2011 was $6.7 million, or $0.09 per share. DNOI for the quarter reflects the impact of $5.0 million of restructuring and other charges. DNOI refers to net operating income adjusted for amortization of employee restricted stock awards.
  • Net operating income for the quarter ended September 30, 2011 was $6.0 million, or $0.08 per share, consistent with the Company's prior guidance.
  • Net loss for the quarter ended September 30, 2011 was $25.1 million, or $0.33 per share.
  • Net investment loss for the quarter ended September 30, 2011 was $31.1 million, which included a $24.7 million reduction in the fair value of Broadview Networks Holdings, Inc.
  • MCG's ratio of total assets to total borrowings and other senior securities was 230% as of September 30, 2011.

Important Information About Non-GAAP References

References by MCG Capital Corporation to distributable net operating income, or DNOI, refer to net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit), as determined in accordance with GAAP adjusted for amortization of employee restricted stock awards.

The following table reconciles net operating income before investment loss, loss on extinguishment of debt, and income tax provision, which is a GAAP measure, to DNOI for the three months ended September 30, 2011:

(in thousands, except per share amounts)    

Three Months Ended September 30, 2011

Net operating income before net investment loss, loss on extinguishment of debt and income tax provision
    $ 5,953
Amortization of employee restricted stock awards      

779

(a)
DNOI     $ 6,732  
DNOI per common share—basic and diluted $ 0.09

Weighted-average common shares outstanding—basic and diluted
76,404

(a)

Amortization of employee restricted stock awards includes $431 of amortization of employee restricted stock awards associated with our corporate restructuring.

The Company's management uses DNOI and the related per share measures as useful and appropriate supplements to net operating income, net income (loss), earnings (loss) per share and cash flows from operating activities. These measures serve as an additional measure of MCG's operating performance exclusive of employee restricted stock amortization, which represents an expense of the Company but does not require settlement in cash. DNOI does include PIK interest and dividend income that generally are not payable in cash on a regular basis, but rather at investment maturity or when declared.

The Company believes that providing non-GAAP DNOI and DNOI per share affords investors a view of results that may be more easily compared to peer companies and enables investors to consider the Company's results on both a GAAP and non-GAAP basis in periods when the Company is undertaking non-recurring activities. DNOI should not be considered as an alternative to, as an indicator of the Company's operating performance, or as a substitute for net operating income, net (loss) income, earnings (loss) per share and cash flows from operating activities (each computed in accordance with GAAP). Instead, DNOI should be reviewed in connection with net operating income, net (loss) income, earnings (loss) per share and cash flows from operating activities in MCG's consolidated financial statements, to help analyze how MCG's business is performing because the items excluded from the non-GAAP measures often have a material impact on the Company's results of operations. Therefore, management uses, and investors should use, non-GAAP measures only in conjunction with its reported GAAP results.

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 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 the effect of the resignation of Steven F. Tunney from his role as MCG's Chief Executive Officer, the appointment of Richard W. Neu to the position of MCG's Chief Executive Officer, other related changes in MCG's leadership, expectations regarding management's ability to maximize shareholder value through the payment of a competitive dividend and continued efforts to close the gap between MCG's stock price and net asset value and those risks, uncertainties and factors referred to in MCG's Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 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.

###

Copyright Business Wire 2010