American Capital Invests $43 Million In HMS Healthcare

BETHESDA, Md., Aug. 4 /PRNewswire-FirstCall/ -- American Capital Strategies Ltd. announced today it has invested $43 million in HMS Healthcare Inc., a holding company established for the acquisition of Sloans Lake Managed Care ("SLMC") and PPOM LLC, two independent non-risk access preferred provider organizations ("PPOs"). American Capital's investment takes the form of senior subordinated debt, junior subordinated debt with warrants and preferred and common equity. GE Capital Corporation, a unit of General Electric Corporation , Royal Bank of Canada , Merrill Lynch Capital, LaSalle Bank and Key Bank are providing a revolving credit facility and senior term debt. American International Group Inc. also invested in the subordinated debt and the junior subordinated debt. KRG Capital Partners is the majority owner and lead sponsor of HMS Healthcare.

"We are pleased to be investing again with KRG and to support their acquisition of these premier regional PPOs," said American Capital COO Ira Wagner. "In HMS, we are investing in a company that emphasizes service to both its network of providers, and the payors for which it accesses cost effective healthcare."

American Capital has invested over $1.4 billion in the last twelve months and over $850 million year to date. For more information about American Capital's portfolio, go to

"With this investment, American Capital is backing an outstanding organization that is the preferred model for accessing health care," said American Capital Managing Director Darin Winn. "HMS offers opportunities for the realization of significant economies of scale and the ability to increase its value proposition to both payors and providers. In particular, both Sloans Lake and PPOM streamline the contracting process between their large network of healthcare providers and their payors providing a win-win for both parties. We especially like the relentless focus at HMS on improving customer service and maintaining a nimble organization that can quickly address issues that arise among payors and providers in the ever-changing healthcare environment."

PPOs contract with providers of healthcare services, aggregating together a network, which they then offer (or "lease") to payors, including insurance carriers, self-insured employers, union trusts and third party administrators ("TPAs"). Providers receive increased patient volume, while payors access cost effective healthcare for their benefit plan enrollees. SLMC, based in Denver, CO, maintains the largest access PPO network in Colorado, with a customer base including nearly all insurance carriers operating in the state. PPOM, based in Southfield, MI, maintains the largest access PPO network in Michigan and also operates in Ohio and Indiana. The combined entity will provide access to healthcare for approximately 1.5 million people and have direct relationships with more than 500 hospitals and 60,000 physicians.

"We are pleased that American Capital continues to support our growth platform companies," said KRG Capital Partners Managing Director Mark King. "We invest with American Capital because they deliver on their commitments, driving deals to close by anticipating and creatively solving any issues that arise during the transaction execution process."

As of July 31, 2004, American Capital shareholders have enjoyed a total return of 257% since the Company's IPO -- an annualized return of 20%, assuming reinvestment of dividends. American Capital has paid a total of $524 million in dividends and paid or declared $15.24 dividends per share since its August 1997 IPO at $15 per share.

American Capital is a publicly traded buyout and mezzanine fund with capital resources over $3.3 billion. American Capital is an investor in and sponsor of management and employee buyouts; invests in private equity sponsored buyouts; and provides capital directly to private and small public companies. American Capital provides senior debt, mezzanine debt and equity to fund growth, acquisitions and recapitalizations.

Companies interested in learning more about American Capital's flexible financing should contact Mark Opel, Senior Vice President, Business Development, at (800) 248-9340, or visit our website at

Founded in 1996, KRG is a Denver based private equity buyout firm that currently manages over $860 million of committed equity capital and equity co- investments. Since inception, KRG has invested in 18 "platform companies" and has completed 53 add-on acquisitions for those platforms.

This press release contains forward-looking statements. The statements regarding expected results of American Capital Strategies are subject to various factors and uncertainties, including the uncertainties associated with the timing of transaction closings, changes in interest rates, availability of transactions, changes in regional or national economic conditions, or changes in the conditions of the industries in which American Capital has made investments.

American Capital Strategies Ltd.

CONTACT: Darin Winn, Managing Director, +1-214-273-6650, or Brian Maney,Director, Corporate Communications, +1-301-951-6122, both of American CapitalStrategies Ltd.

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