MCG Capital Corporation Responds to Unsolicited Proposals and Reaffirms Recommendation in Favor of Merger With PennantPark Floating Rate Capital

MCG Capital Corporation

announced today that its Board of Directors, after careful review of the proposals made by each of HC2 Holdings, Inc. and Accretive Capital Partners, LLC and consultation with its legal and financial advisors, has determined that neither proposal constitutes or is reasonably likely to lead to a superior proposal under MCG's existing merger agreement with PennantPark Floating Rate Capital Ltd.

. The Board has unanimously affirmed its commitment to the pending merger with PFLT, and its recommendation that MCG stockholders vote in favor of the PFLT transaction. Richard W. Neu, Chairman of the MCG Board of Directors, said, "We continue to appreciate the valuable input that we have received from many of our fellow stockholders and expect to continue to have an open dialogue with our stockholders as we move forward with the PFLT transaction. In that spirit, we are continuing our efforts to articulate the reasons underlying our recommendation that MCG stockholders vote in favor of the PFLT transaction. We have repeatedly and publicly explained, in detail, our concerns with respect to HC2's proposal and how they might be addressed. Despite HC2's statements to the contrary, it is our belief that HC2 has not substantively responded to our concerns, including the risks we have identified that could cause the proposed transaction to fail for regulatory reasons. HC2's unorthodox proposal to pay a reverse termination fee in HC2 shares rather than in cash, the value of the proposed reverse termination fee and the circumstances under which HC2 would pay the reverse termination fee also fall short of addressing the concerns arising from these risks. MCG stockholders deserve meaningful protection from the continuing uncertainty surrounding a transaction with HC2, and this proposal does not provide it." Mr. Neu continued, "Today we filed with the SEC an investor presentation outlining these concerns, a list of what we believe are the key questions for MCG stockholders to be asking themselves, along with additional thoughts with respect to this proposal. The MCG Board of Directors determined, and continues to believe today, that after a comprehensive review of its strategic alternatives and thorough auction process, the PFLT merger represents the best option available to our stockholders. We believe that PFLT has a diverse portfolio with a low risk profile, a shareholder-friendly cost structure, consistency of earnings, and an experienced management team through its external investment adviser. We believe that the merger consideration, including dividends expected to be paid on the PFLT common stock after the closing (currently representing an 8.1% annual dividend yield), offers more certain value to our stockholders than is represented by the HC2 transaction. We encourage MCG stockholders to read the presentation, and look forward to hearing from our stockholders throughout this process. Finally, we continue to believe that the recommended PFLT merger can be completed in the third quarter of 2015 if the requisite stockholder approvals are received." MCG continues to refer investors to its presentations of June 2, 2015 and June 8, 2015, which, among other things, addressed concerns as to HC2 and the valuation of its shares. Morgan Stanley & Co. LLC is serving as financial advisor to MCG, Wachtell, Lipton, Rosen & Katz is serving as legal counsel to MCG and Sutherland Asbill & Brennan LLP is serving as legal counsel to MCG with respect to the Investment Company Act of 1940.