Done Deals: American Capital Tops Record –

In its largest commitment to date, American Capital Strategies purchased $30 million of senior subordinated notes with warrants from Goldman Industrial Group. Boston-based Goldman owns several machine tool manufacturing companies in Massachusetts.

Adam Blumenthal, president of American Capital, described Goldman’s businesses as strong industrial companies in the “middle of the middle market” with stable cash flows, commanding market positions and long histories. However, he said, industrial companies are not drawing support from the public capital markets and haven’t in the last 10 years – which makes Goldman a good investment for American Capital.

“This is part of a series of what we view as the flight of capital away from companies with cash flow,” he said. “The high-yield markets weren’t interested in helping a company of this size so we stepped in and replaced that with bank debt and mezzanine financing.”

American Capital’s investment will provide long-term financing for Goldman and will refinance an existing bridge loan put in place for the acquisition of Bridgeport Machines last August.

Blumenthal said the firm will help Goldman implement new products, cost reduction strategies, and tighten management.

Additionally, there are many opportunities for the businesses to grow through acquisitions as similar companies suffer from low valuation in the marketplace, he said.

“We expect to see several more of these transactions over the course of the year as we attempt to fill this enormous gap that used to be taken up with high-yield offerings,” he said.

Other Goldman companies include Bryant Grinder Corp. and Fellows Corp. Customers include automobile companies, auto industry suppliers and other industrial companies.

Blumenthal declined to provide overall revenue information, but said Bridgeport Machines generated approximately $150 million last year.

Prior to the Goldman acquisition, American Capital’s largest investment went to Fulton Bellows & Components, at $24.5 million, last month.

The firm’s investments will continue to be around $30 million and larger, Blumenthal said, as its capital resources continue to increase. Current capital is at $460 million, up from $150 million in 1997.