MCG Capital (MCGC) 8-K MCG Capital Corporation Reports First Quarter 2011 Results

Exhibit 99.1

	MCG Capital Corporation	PRESS RELEASE
	1100 Wilson Boulevard
	Suite 3000	Contact:Marshall Murphy
	Arlington, VA 22209	(703) 562-7110
	(703) 247-7500	MMurphy@MCGCapital.com
	(866) 904-4775 (FAX)
	www.MCGCapital.com
	FOR IMMEDIATE RELEASE

MCG CAPITAL CORPORATION REPORTS FIRST QUARTER 2011 RESULTS

DECLARES DIVIDEND OF $0.17 PER SHARE

ARLINGTON, VA—May 9, 2011—MCG Capital Corporation (Nasdaq: MCGC) (“MCG” or the “Company”) announced today its financial results for the quarter ended March 31, 2011. MCG will host an investment community conference call today, May 9, 2011 at 10:00 a.m. (Eastern Time). Slides and financial information to be reviewed during the investor conference call will be available on MCG’s website athttp://www.mcgcapital.com prior to the call.

HIGHLIGHTS

• Distributable net operating income, or DNOI, for the quarter ended March 31, 2011 was $13.6 million, or $0.18 per share. DNOI refers to net operating income adjusted for amortization of employee restricted stock awards.

• Net operating income for the quarter ended March 31, 2011 was $13.0 million, or $0.17 per share.

• Net loss for the quarter ended March 31, 2011 was $8.8 million, or $0.12 per share.

• Net investment loss for the quarter ended March 31, 2011 was $20.9 million, which included a $24.3 million reduction in the fair value of Broadview Networks Holdings, Inc., or Broadview, resulting from a decrease in the multiples used to value that investment.

• During the quarter ended March 31, 2011, MCG made $95.1 million of advances and originations, including $54.0 million in investments to six new portfolio companies. Payoffs and portfolio monetization activities totaled $129.2 million during the quarter.

• Repaid in full the remaining $17.4 million of Series 2005-A 9.98% unsecured notes.

• MCG’s ratio of total assets to total borrowings and other senior securities was 233% as of March 31, 2011.

DIVIDEND DECLARATION

MCG also announced today that its board of directors declared a dividend of $0.17 per share. The dividend is payable as follows:

Record date: June 15, 2011

Payable date: July 15, 2011

OVERVIEW

Today, MCG reported a first quarter 2011 net loss of $8.8 million, or $0.12 per basic and diluted share, which represented a $14.8 million, or $0.20 per share, decrease from the net income of $6.0 million, or $0.08 per share, reported for the comparable period in 2010. This decrease resulted primarily from an $18.6 million increase in MCG’s net investment loss and a $0.8 million increase in the loss on extinguishment of debt, partially offset by a $4.6 million increase in net operating income.

MCG’s revenue for the first quarter of 2011 was $24.3 million, which represented a $2.6 million, or 11.8%, increase from the comparable period in 2010. This increase was composed of a $1.8 million increase in interest and dividend income, including a $1.2 million increase in dividend income on existing investments and a $0.6 million increase in interest income, which resulted from an increase in the Company’s average portfolio balance. In addition, advisory fees increased $0.7 million during the first quarter of 2011 as a result of origination activity over the first quarter of 2010. MCG reported DNOI of

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$13.6 million, or $0.18 per share, which represented a $4.0 million, or $0.05 per share, increase over the first quarter of 2010. Net operating income during the first quarter of 2011 was $13.0 million, which represents a $4.6 million, or 54.1%, increase over the comparable period in 2010.

“Overall we are pleased with the volume of first quarter originations, the level of equity monetizations during the quarter and after quarter-end, the increase in our first quarter net operating income and distributable net operating income, and the repositioning of low-yielding assets. Based on our results, we will be increasing our dividend to $0.17 per share for the first quarter,” said Steven Tunney, President and CEO. “This is our fourth consecutive quarterly dividend increase since we reinstated our dividend in April 2010. We remain focused on our strategy of monetizing low-yielding investments and redeploying proceeds and balance sheet cash into new investments to grow operating income and distributions to our stockholders.”

LIQUIDITYAND CAPITAL RESOURCES

As of March 31, 2011, MCG’s cash and cash equivalents totaled $40.6 million and it had $527.3 million of borrowings (the majority of which was composed of $443.6 million of collateralized non-recourse borrowings). As a business development company, MCG is required to meet an asset coverage ratio of total net assets to total borrowings and other senior securities of at least 200% in order to borrow under new or existing borrowing facilities or to distribute dividends to its stockholders. MCG’s asset coverage ratio increased from 231% as of December 31, 2010 to 233% as of March 31, 2011. The cash balance in the securitization and restricted accounts, which may be deployed for suitable new investment opportunities, was $92.5 million as of March 31, 2011. As of March 31, 2011, MCG had $45.0 million in available incremental capacity under its 2006-1 facility, subject to facility requirements. In addition, MCG had $6.0 million of funded borrowing capacity, subject to the United States Small Business Administration’s, or SBA’s, approval, available in its small business investment company, or SBIC, subsidiary that effectively is exempt from the statutory asset coverage ratio requirements.

As of March 31, 2011, the total borrowing potential under the SBA license with Solutions Capital I, L.P. is $150.0 million. To access the entire $150.0 million borrowing potential, MCG would have to fund $25.4 million, in addition to the $49.6 million that it had funded through March 31, 2011. Additionally, in March 2011, the Company formed another wholly owned subsidiary, Solutions Capital II, L.P. The Company received approval from the SBA to submit an application for a second SBIC license under Solutions Capital II, L.P. If approved, the total borrowing capacity under both SBICs would increase from $150.0 million to $225.0 million in the aggregate.

During the first quarter of 2011, MCG repaid in full the remaining $17.4 million of Series 2005-A unsecured notes. The notes carried an interest rate of 9.98% and had a maturity date of October 2011. The Series 2007-A unsecured notes due October 2012 remain outstanding with a balance of $8.7 million.

PORTFOLIO ACTIVITY

The fair value of MCG’s investment portfolio totaled $954.3 million as of March 31, 2011, as compared to $1,009.7 million as of December 31, 2010. During the first quarter of 2011, MCG made $95.1 million of originations and advances, including $54.0 million of originations to six new portfolio companies, $35.8 million of originations and advances to 13 existing portfolio companies under revolving and line of credit facilities, and $5.3 million of paid-in-kind, or PIK, advances. The $54.0 million of originations to new portfolio companies, included $25 million of senior debt investments and $29.0 million in subordinated debt investments. The $35.8 million of originations and advances to existing portfolio companies included $35.3 million of investments in senior debt securities and a total of $0.5 million of preferred and common equity in two portfolio companies. Gross payments, reductions and sales of securities during the first quarter of 2011 of $129.2 million were composed of $73.2 million of senior debt, $37.6 million of secured subordinated debt, $18.2 million of preferred equity and $0.2 million of common equity.

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During the three months ended March 31, 2011, MCG reported net investment losses before income tax provision of $20.9 million, which are detailed below:

			Three months ended March 31, 2011
(in thousands) Portfolio Company	Industry		Type		Realized Gain/ (Loss)			Unrealized (Depreciation)/ Appreciation			Reversal of Unrealized Depreciation/ (Appreciation)			Net (Loss)/ Gain
Broadview Networks Holdings, Inc.		Communications		Control	$	—		$	(24,289	)	$	—		$	(24,289	)
Premier Garage Holdings LLC.		Home Furnishings		Control		—			(3,281	)		—			(3,281	)
Superior Industries Investors, Inc.		Sporting Goods		Control		988			—			(2,788	)		(1,800	)
Provo Craft & Novelty Inc.		Leisure Activities		Non-Affiliate		—			(1,160	)		—			(1,160	)
Jenzabar, Inc.		Technology		Non-Affiliate		—			(1,121	)		—			(1,121	)
RadioPharmacy Investors, LLC		Healthcare		Control		—			4,852			—			4,852
Cruz Bay Publishing, Inc.		Publishing		Non-Affiliate		—			1,524			—			1,524
Restaurant Technologies, Inc.		Food Services		Non-Affiliate		—			1,429			—			1,429
Active Brands International, Inc.		Consumer Products		Non-Affiliate		(27,654	)		—			27,776			122
Other (< $1 million net gain (loss))						(961	)		2,947			794			2,780
Total					$	(27,627	)	$	(19,099	)	$	25,782		$	(20,944	)

The decrease in the fair value of Broadview is primarily attributable to a decrease in the multiples used to value that investment. During the quarter ended March 31, 2011, MCG received payments of $2.1 million on the sale of Active Brands International, Inc., or Active Brands, senior debt and wrote off the Company’s equity in that portfolio company. In conjunction with the Active Brands transaction, MCG reversed $27.8 million of previously unrealized depreciation and realized a $27.7 million loss.

Conference Call (Live Call)	Date and time	Monday, May 9, 2011 at 10:00 a.m. Eastern Time
	Dial-in Number (No Conference ID required)	(877) 878-2269 domestic (847) 829-0062 international
	Webcast	http://investor.mcgcapital.com
Replay (Available through May 23, 2011)	Call Replay (Conference ID for replay is #64774162) Web Replay	(800) 642-1687 domestic (706) 645-9291 international http://investor.mcgcapital.com

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MCG Capital Corporation

Consolidated Balance Sheets

(in thousands, except per share amounts)	March 31, 2011			December 31, 2010
	(unaudited)
Assets
Cash and cash equivalents	$	40,571		$	44,970
Cash, securitization accounts		70,562			42,245
Cash, restricted		21,941			29,383
Investments at fair value
Non-affiliate investments (cost of$647,348and $684,785, respectively)		640,512			646,116
Affiliate investments (cost of$43,137and $43,721, respectively)		54,163			53,300
Control investments (cost of$492,831and $517,167, respectively)		259,674			310,289
Total investments (cost of$1,183,616and $1,245,673, respectively)		954,349			1,009,705
Interest receivable		3,492			5,453
Other assets		14,235			13,521
Total assets	$	1,105,150		$	1,145,277
Liabilities
Borrowings (maturing within one year of$0and $18,858, respectively)	$	527,343		$	546,882
Interest payable		1,593			2,291
Dividends payable		11,582			10,735
Other liabilities		7,539			7,353
Total liabilities		548,057			567,261
Stockholders’ equity
Preferred stock, par value $0.01, authorized 1 share, none issued and outstanding		—			—
Common stock, par value $0.01, authorized 200,000 shares on March 31, 2011 and December 31, 2010,77,065issued and outstanding on March 31, 2011 and 76,662 issued and outstanding on December 31, 2010		771			767
Paid-in capital		1,008,293			1,008,823
Distributions in excess of earnings
Paid-in capital		(166,029	)		(166,029	)
Other		(55,635	)		(28,555	)
Net unrealized depreciation on investments		(230,307	)		(236,990	)
Total stockholders’ equity		557,093			578,016
Total liabilities and stockholders’ equity	$	1,105,150		$	1,145,277
Net asset value per common share at end of period	$	7.23		$	7.54

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MCG Capital Corporation

Consolidated Statements of Operations

	Three months ended March 31,
(in thousands, except per share amounts)	2011			2010
Revenue
Interest and dividend income
Non-affiliate investments (less than 5% owned)	$	17,558		$	14,846
Affiliate investments (5% to 25% owned)		1,143			982
Control investments (more than 25% owned)		4,735			5,783
Total interest and dividend income		23,436			21,611
Advisory fees and other income
Non-affiliate investments (less than 5% owned)		507			22
Control investments (more than 25% owned)		360			113
Total advisory fees and other income		867			135
Total revenue		24,303			21,746
Operating expenses
Interest expense		3,873			4,473
Employee compensation
Salaries and benefits		3,976			4,796
Amortization of employee restricted stock awards		624			1,227
Total employee compensation		4,600			6,023
General and administrative expense		2,827			2,811
Total operating expenses		11,300			13,307
Net operating income before net investment loss, loss on extinguishment of debt and income tax provision		13,003			8,439
Net realized gain (loss) on investments
Non-affiliate investments (less than 5% owned)		(27,917	)		(2,267	)
Affiliate investments (5% to 25% owned)		(917	)		—
Control investments (more than 25% owned)		1,207			—
Total net realized gain (loss) gain on investments		(27,627	)		(2,267	)
Net unrealized (depreciation) appreciation on investments
Non-affiliate investments (less than 5% owned)		31,533			4,730
Affiliate investments (5% to 25% owned)		1,447			1,200
Control investments (more than 25% owned)		(26,279	)		(6,114	)
Derivative and other fair value adjustments		(18	)		87
Total net unrealized (depreciation) appreciation on investments		6,683			(97	)
Net investment loss before income tax provision		(20,944	)		(2,364	)
Loss on extinguishment of debt before income tax provision		(863	)		(58	)
Income tax provision		11			62
Net (loss) income	$	(8,815	)	$	5,955
Earnings per basic and diluted common share	$	(0.12	)	$	0.08
Cash distributions declared per common share	$	0.15		$	—
Weighted-average common shares outstanding—basic and diluted		75,765			76,339

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MCG Capital Corporation

Consolidated Statements of Cash Flows

	Three months ended March 31,
(in thousands)	2011			2010
Cash flows from operating activities
Net (loss) income	$	(8,815	)	$	5,955
Adjustments to reconcile net (loss) income to net cash provided by operating activities
Investments in portfolio companies		(89,483	)		(35,408	)
Principal collections related to investment repayments or sales		119,260			33,044
Decrease (increase) in interest receivable, accrued payment-in-kind interest and dividends		6,503			(6,385	)
Amortization of restricted stock awards
Employee		624			1,227
Non-employee director		17			26
Decrease (increase) in cash—securitization accounts from interest collections		(7,891	)		4,001
Increase in restricted cash—escrow accounts		(1,224	)		—
Depreciation and amortization		902			1,101
Decrease in other assets		85			113
Decrease in other liabilities		(419	)		(3,935	)
Realized loss on investments		27,627			2,267
Net change in unrealized (appreciation) depreciation on investments		(6,683	)		97
Loss on extinguishment of debt		863			58
Net cash provided by operating activities		41,366			2,161
Cash flows from financing activities
Payments on borrowings		(25,402	)		(23,014	)
Proceeds from borrowings		5,000			—
Decrease (increase) in cash in restricted and securitization accounts
Securitization accounts for repayment of principal on debt		(20,426	)		10,535
Restricted cash		8,666			12,194
Payment of financing costs		(1,701	)		(1,500	)
Distributions paid		(10,735	)		—
Common stock withheld to pay taxes applicable to the vesting of restricted stock		(1,167	)		—
Net cash used in financing activities		(45,765	)		(1,785	)
Net (decrease) increase in cash and cash equivalents		(4,399	)		376
Cash and cash equivalents
Beginning balance		44,970			54,187
Ending balance	$	40,571		$	54,563
Supplemental disclosure of cash flow information
Interest paid	$	3,952		$	3,049
Income taxes (refunded) paid		(103	)		188
Payment-in-kind interest collected		5,780			405
Dividend income collected		4,183			—

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SELECTED FINANCIAL DATA

QUARTERLY OPERATING INFORMATION

(in thousands, except per share amounts)	2010 Q1			2010 Q2			2010 Q3			2010 Q4			2011 Q1
Revenue
Interest and dividend income
Interest income	$	19,558		$	19,089		$	19,519		$	18,459		$	20,158
Dividend income		1,329			1,494			1,561			2,984			2,497
Loan fee income		724			570			810			432			781
Total interest and dividend income		21,611			21,153			21,890			21,875			23,436
Advisory fees and other income		135			615			681			1,609			867
Total revenue		21,746			21,768			22,571			23,484			24,303
Operating expense
Interest expense		4,473			4,383			4,326			3,709			3,873
Salaries and benefits		4,796			3,742			3,527			4,210			3,976
Amortization of employee restricted stock awards		1,227			1,123			1,013			979			624
General and administrative		2,811			3,670			2,305			2,710			2,827
Total operating expense		13,307			12,918			11,171			11,608			11,300
Net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit)		8,439			8,850			11,400			11,876			13,003
Net investment loss before income tax provision (benefit)		(2,364	)		(12,966	)		(9,800	)		(29,689	)		(20,944	)
Gain (loss) on extinguishment of debt before income tax provision (benefit)		(58	)		3,490			(449	)		—			(863	)
Income tax provision (benefit)		62			124			1,680			(65	)		11
Net income (loss)	$	5,955		$	(750	)	$	(529	)	$	(17,748	)	$	(8,815	)
Reconciliation of DNOI to net operating income
Net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit)	$	8,439		$	8,850		$	11,400		$	11,876		$	13,003
Amortization of employee restricted stock awards		1,227			1,123			1,013			979			624
DNOI(a)	$	9,666		$	9,973		$	12,413		$	12,855		$	13,627
DNOI per share-weighted average common shares—basic and diluted(a)	$	0.13		$	0.13		$	0.16		$	0.17		$	0.18
Per common share statistics
Weighted-average common shares outstanding—basic and diluted		76,339			75,392			75,486			75,648			75,765
Net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit) per common share—basic and diluted	$	0.11		$	0.12		$	0.15		$	0.16		$	0.17
Earnings (loss) per common share—basic and diluted	$	0.08		$	(0.01	)	$	(0.01	)	$	(0.23	)	$	(0.12	)
Net asset value per common share—period end	$	8.16		$	8.03		$	7.92		$	7.54		$	7.23
Dividends declared per common share(b)	$	—		$	0.11		$	0.12		$	0.14		$	0.15

^(a)  DNOI represents net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit), as determined in accordance with U.S. generally accepted accounting principles, or GAAP, adjusted for amortization of employee restricted stock awards. MCG views 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 which are generally not payable in cash on a regular basis, but rather at investment maturity or when declared. DNOI should not be considered as an alternative to net operating income, net income (loss), 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 income (loss), 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.

^(b)  On May 5, 2011, MCG’s board of directors declared a dividend of $0.17 per share payable on July 15, 2011 to shareholders of record as of June 15, 2011.

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SELECTED FINANCIAL DATA

KEY QUARTERLY STATISTICS

(dollars in thousands)	2010 Q1			2010 Q2			2010 Q3			2010 Q4			2011 Q1
Average quarterly loan portfolio at fair value	$	684,370		$	686,746		$	670,726		$	663,443		$	756,842
Average quarterly total investment portfolio - fair value		986,022			989,782			954,231			948,504			1,003,581
Average quarterly total assets		1,171,779			1,162,988			1,153,995			1,111,728			1,131,291
Average quarterly stockholders’ equity		616,726			620,079			606,933			600,816			574,024
Return on average total assets (trailing 12 months)
Net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit)		2.91	%		3.01	%		3.26	%		3.53	%		3.96	%
Net income (loss)		0.49	%		0.93	%		0.53	%		(1.14	)%		(2.44	)%
Return on average equity (trailing 12 months)
Net operating income before net investment loss, gain (loss) on extinguishment of debt and income tax provision (benefit)		5.69	%		5.77	%		6.21	%		6.64	%		7.51	%
Net income (loss)		0.96	%		1.79	%		1.02	%		(2.14	)%		(4.64	)%
Yield on average loan portfolio at fair value
Average LIBOR (90-Day)		0.26	%		0.43	%		0.39	%		0.29	%		0.31	%
Spread to average LIBOR on average yielding loan portfolio at fair value(a)		12.37	%		11.89	%		12.45	%		11.51	%		11.22	%
		12.63	%		12.32	%		12.84	%		11.80	%		11.53	%
Impact of fee accelerations of unearned fees on paid/restructured loans		0.14	%		0.05	%		0.20	%		0.00	%		0.00	%
Impact of non-accrual loans		(0.75	)%		(0.89	)%		(1.02	)%		(0.50	)%		(0.31	)%
Total yield on average loan portfolio at fair value		12.02	%		11.48	%		12.02	%		11.30	%		11.22	%
Cost of funds
Average LIBOR		0.26	%		0.43	%		0.39	%		0.29	%		0.31	%
Spread to average LIBOR excluding amortization of deferred debt issuance costs(a)		2.48	%		2.31	%		2.31	%		2.16	%		2.08	%
Impact of amortization of deferred debt issuance costs		0.55	%		0.57	%		0.50	%		0.46	%		0.45	%
Total cost of funds		3.29	%		3.31	%		3.20	%		2.91	%		2.84	%
Net portfolio yield margin		6.95	%		6.70	%		7.20	%		7.49	%		7.80	%
Selected period-end balance sheet statistics
Total investment portfolio at fair value	$	991,032		$	997,590		$	924,253		$	1,009,705		$	954,349
Total assets		1,171,385			1,170,463			1,136,665			1,145,277			1,105,150
Borrowings		534,892			534,278			508,899			546,882			527,343
Total equity		622,897			614,855			606,078			578,016			557,093
Cash, securitization and restricted accounts		103,643			108,612			124,545			71,628			92,503
Debt to equity		85.87	%		86.89	%		83.97	%		94.61	%		94.66	%
Debt, net of cash, securitization and restricted accounts to equity		69.23	%		69.23	%		63.42	%		82.22	%		78.06	%
Other statistics (at period end)
BDC asset coverage ratio		222	%		224	%		233	%		231	%		233	%
Number of portfolio companies		58			59			62			71			67
Number of employees		65			65			66			66			63
Loans on non-accrual as a percentage of total debt investments
Fair Value		4.08	%		4.69	%		4.35	%		3.43	%		4.43	%
Cost		12.92	%		15.12	%		18.33	%		15.87	%		13.93	%

^(a)  The impact due to the timing of the LIBOR resets and floors is included in the spread to average LIBOR. The impact to the yield on average loan portfolio at fair value due to the timing of LIBOR resets and floors for Q1 2010, Q2 2010, Q3 2010, Q4 2010 and Q1 2011 was approximately 0.78%, 0.73%, 1.25%, 1.34% and 1.34%, respectively. The impact to the cost of funds due to the timing of LIBOR resets for Q1 2010, Q2 2010, Q3 2010, Q4 2010 and Q1 2011 was approximately 0.01%, (0.01)%, 0.05%, 0.05% and (0.3)%, respectively.

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SELECTED FINANCIAL DATA

QUARTERLY INVESTMENT RISKAND CHANGESIN PORTFOLIO COMPOSITION

(dollars in thousands)	2010 Q1			2010 Q2			2010 Q3			2010 Q4			2011 Q1
Investment rating:(a)
IR 1 total investments at fair value(b)	$	568,918		$	555,745		$	451,743		$	330,605		$	319,588
IR 2 total investments at fair value		151,526			194,690			242,579			370,694			336,050
IR 3 total investments at fair value		256,380			204,892			195,342			173,447			187,610
IR 4 total investments at fair value		3,188			1,988			6,796			112,811			94,293
IR 5 total investments at fair value		11,020			40,275			27,793			22,148			16,808
IR 1 percentage of total portfolio		57.4	%		55.7	%		48.9	%		32.7	%		33.5	%
IR 2 percentage of total portfolio		15.3	%		19.5	%		26.3	%		36.7	%		35.2	%
IR 3 percentage of total portfolio		25.9	%		20.6	%		21.1	%		17.2	%		19.6	%
IR 4 percentage of total portfolio		0.3	%		0.2	%		0.7	%		11.2	%		9.9	%
IR 5 percentage of total portfolio		1.1	%		4.0	%		3.0	%		2.2	%		1.8	%
Originations and advances, including PIK, by security type:
Senior secured debt	$	32,814		$	34,596		$	46,692		$	145,440		$	61,918
Subordinated debt—Secured		6,387			4,001			17,986			9,116			30,143
Subordinated debt—Unsecured		132			10,178			2,855			75			57
Preferred equity		1,330			1,636			1,561			4,751			2,801
Common/common equivalents equity		—			1			—			716			184
Total	$	40,663		$	50,412		$	69,094		$	160,098		$	95,103
Exits and repayments by security type:
Senior secured debt	$	32,649		$	9,517		$	21,315		$	24,770		$	73,186
Subordinated debt—Secured		667			11,880			51,177			2,749			37,568
Subordinated debt—Unsecured		—			—			31,618			—			—
Preferred equity		—			8,844			16,579			2,410			18,224
Common/common equivalents equity		133			55			12,531			12,774			245
Total	$	33,449		$	30,296		$	133,220		$	42,703		$	129,223
Exits and repayments by transaction type:
Scheduled principal amortization	$	7,092		$	16,933		$	6,277		$	12,186		$	4,907
Principal prepayments and loan sales		25,819			50			85,129			14,037			100,068
Payment of payment-in-kind interest and dividends		405			5,369			13,851			3,164			9,963
Sale of equity investments		133			7,944			27,963			13,316			14,285
Total	$	33,449		$	30,296		$	133,220		$	42,703		$	129,223

^(a)  MCG uses an investment rating system to characterize and monitor its expected level of returns on each investment in MCG’s portfolio. MCG uses the following 1 to 5 investment rating scale:

Investment Rating
1	Capital gain expected or realized
2	Full return of principal and interest or dividend expected with customer performing in accordance with plan
3	Full return of principal and interest or dividend expected but customer requires closer monitoring
4	Some loss of interest or dividend expected but still expecting an overall positive internal rate of return on the investment
5	Loss of interest or dividend and some loss of principal investment expected which would result in an overall negative internal rate of return on the investment

^(b)  As of March 31, 2010, June 30, 2010, September 30, 2010, December 31, 2010 and March 31, 2011, approximately, $207 million, $205 million, $117 million, $112 million and $119 million, respectively, of MCG’s investments with an investment rating of “1” represented loans to companies in which MCG also held equity.

MCG Capital Corporation

May 9, 2011

Page 10

SELECTED FINANCIAL DATA

PORTFOLIO COMPOSITIONBY TYPE

(dollars in thousands)	2010 Q1			2010 Q2			2010 Q3			2010 Q4			2011 Q1
Composition of investments at period end, fair value
Senior secured debt	$	379,600		$	419,398		$	437,709		$	555,667		$	547,280
Subordinated debt
Secured		272,713			237,226			187,918			190,309			177,628
Unsecured		30,760			40,848			12,241			12,321			12,588
Total debt investments		683,073			697,472			637,868			758,297			737,496
Preferred equity		261,931			248,983			244,864			218,690			183,735
Common/common equivalents equity		46,028			51,135			41,521			32,718			33,118
Total equity investments		307,959			300,118			286,385			251,408			216,853
Total investments	$	991,032		$	997,590		$	924,253		$	1,009,705		$	954,349
Percentage of investments at period end, fair value
Senior secured debt		38.3	%		42.0	%		47.4	%		55.0	%		57.4	%
Subordinated debt
Secured		27.5	%		23.8	%		20.3	%		18.9	%		18.6	%
Unsecured		3.1	%		4.1	%		1.3	%		1.2	%		1.3	%
Total debt investments		68.9	%		69.9	%		69.0	%		75.1	%		77.3	%
Preferred equity		26.4	%		25.0	%		26.5	%		21.7	%		19.2	%
Common/common equivalents equity		4.7	%		5.1	%		4.5	%		3.2	%		3.5	%
Total equity investments		31.1	%		30.1	%		31.0	%		24.9	%		22.7	%
Total investments		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

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 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.

MCG Capital Corporation

May 9, 2011

Page 11

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. MCG’s investment objective is to achieve current income and capital gains. Portfolio companies generally use capital provided by MCG to finance acquisitions, recapitalizations, buyouts, organic growth and working capital.

Forward-looking Statements:

Statements in this press release regarding management’s future expectations, beliefs, intentions, goals, strategies, plans or prospects, including statements relating to: MCG’s results of operations, including revenues, net operating income, distributable net operating income, net investment losses and general and administrative expenses and the factors that may affect such results; the performance of current or former MCG portfolio companies; the cause of net investment losses; management’s belief that, as the Company deploys debt and equity proceeds from monetization activities, it can continue to increase operating income and support the future growth of distributions to MCG stockholders; and general economic factors 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 those risks, uncertainties and factors referred to in MCG’s Annual Report on Form 10-K for the year ended December 31, 2010 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.