MCG Capital is putting its money on the little guy. The closed-end investment firm lends money to and invests in small and midsized US firms with annual sales between $20 million and $200 million. As a business development company (BDC), MCG is required to invest at least 70% of its assets in private or thinly traded US public companies. It is an active investor, working with companies' management teams to set and execute strategy. The company has invested more than $6 billion in more than 600 transactions since its 1999 founding. Its current portfolio includes stakes in more than 70 companies with an aggregate value of approximately $1 billion.
The portfolio spans more than 30 industries, including telecommunications, business services, health care, technology, manufacturing, and food. MCG's ten largest holdings accounted for more than a third of the company's revenues and more than 40% of the value of the its portfolio at the end of fiscal 2010.
MCG usually makes senior or subordinated debt investments in its portfolio companies. It also has common and preferred equity interests, but its limiting that investment activity. Its portfolio companies typically use the funding for acquisitions, recapitalizations, buyouts, growth financing, or working capital.
MCG sold two of its largest holdings, telecom firm Avenue Broadband and Superior Industries Investors, a manufacturer of playground equipment and other products, in 2011 in two separate transactions. The company reported more than $90 million in cash proceeds from the divestitures. It sold stakes in more than a dozen firms in 2010.
Robert Merrick, one of the founders of MCG, left the firm in mid-2009 after his position of chief investment officer was eliminated. He then resigned his seat on the company's board. The move was part of an agreement between MCG and shareholder Springbok Capital Management to reduce the number of board positions from nine to eight that came as a result of a contested election of directors at the company's annual meeting. The board reduced the number of directors to seven in 2011 after CEO Steven Tunney left MCG to pursue other opportunities. Chairman Richard Neu succeeded Tunney as chief executive. – less