MSouth Equity Buys LMS Intellibound Group

MSouth Equity Partners has sponsored an acquisition of LMS Intellibound Group Inc., a provider of outsourced managed labor services, primarily to the grocery and food service sectors. No financial terms were disclosed, except that MCG Capital Corp. sold its position for $40.5 million.

PRESS RELEASE

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.