MVC Capital Announces Sale of Baltic Motors and BM Auto for $120 Million

PURCHASE, N.Y.--MVC Capital, Inc. , a publicly traded business development company that makes private debt and equity investments, today announced that it has signed a definitive agreement to sell Baltic Motors Corporation (“Baltic”) and SIA BM Auto (“BM Auto”), two of the Fund's portfolio companies located in Latvia, to Inchcape PLC (LSE: INCH), a leading independent, international automotive distributor and retailer, for a combined total value of approximately $120 million, (subject to standard working capital adjustments at closing). The acquisition is expected to close after receiving customary regulatory approvals in Latvia.

The Fund originally acquired Baltic in June 2004 with an equity investment of $6 million. As of the signing of the definitive agreement, total commitments of the Fund to Baltic included $8 million of equity and $10 million of subordinated debt. Baltic’s sale price of $78 million would produce a realized gain of $47 million (net of debt and management participation) and would result in a 105% IRR (including fees earned) on the Fund’s invested equity.

The strong performance of Baltic Motors led to the Fund's $8 million equity investment in BM Auto in February 2006. At that time, the Fund also provided $7 million in bridge financing to the Company which has since been repaid. The BM Auto sale price of $42 million would produce a realized gain of $23 million (net of debt and management participation) and would result in a 192% IRR (including fees earned) on MVC’s invested equity.

The combined realized gain to the Fund of $70 million represents a 118% IRR including fees earned throughout the life of both investments. The Fund’s investment in Baltic was one of the first commitments made under the Fund’s current management team and signifies the first full maturation of a portfolio company over the investment life cycle. Furthermore, some or all of the gain from the transaction may not result in a taxable capital gain to shareholders because the Fund expects to offset gains with capital loss deductions (including capital loss carryforwards).

“We are pleased with the success of both Baltic and BM Auto over the past few years,” said Michael Tokarz, Chairman and Portfolio Manager of MVC Capital. “Upon closing, this transaction will produce a realized gain representing nearly 20% of the Fund’s current size, or 62% of the net assets of the Fund at the time of the original investment in June 2004. The Fund’s success with these investments reflects our investment team’s ability to recognize areas of emerging opportunity like the Baltic region in its early stages and then capitalize on them by pairing promising businesses with the right management team to deliver on the businesses’ growth potential.”

As a result of signing the agreement, the Fund’s investments in Baltic and BM Auto increased by approximately $13 million or $0.53 per share as of today. The fair values of Baltic and BM Auto have been increased by approximately $8 million to $55 million and by approximately $5 million to $31 million, respectively. The Fund’s NAV as of today is $15.01 per share (net of incentive compensation).

The sale proceeds and resulting gains to the Fund are subject to working capital adjustments at closing and to fluctuations based upon movements in currency rates.

About MVC Capital

MVC Capital is a Business Development Company traded on the New York Stock Exchange that provides long-term debt and equity investment capital to fund growth, acquisitions and recapitalizations of companies in a variety of industries. For additional information about MVC, please visit the Company’s website at www.mvccapital.com.