Allied Capital Invests $77.0 Million in Triax Holdings, LLC

WASHINGTON, D.C., July 7, 2005 (BUSINESS WIRE) – Allied Capital Corporation (NYSE: ALD – News), announced today that it has invested $77.0 million in Triax Holdings, LLC to finance its acquisition of substantially all the assets of Spear Dermatology Products, Inc. and Spear Pharmaceuticals, Inc. (collectively “Spear”). Allied Capital’s investment took the form of subordinated notes and a controlling interest in the equity of the company. Management of Triax also participated in the deal with a minority equity investment.

Spear Pharmaceuticals markets and distributes the only complete line of Tretinoin, the generic equivalent of a leading topical prescription acne medication. Included in the Tretinoin product line are five Abbreviated New Drug Application (“ANDA”) approvals. The products are marketed to major national wholesalers, drug store chains and regional and specialty distributors.

Triax was formed to acquire and develop a platform of specialty pharmaceutical products with a focus on dermatology. Triax is led by two seasoned pharmaceutical industry executives, Joseph Krivulka and Leonard Mazur, with extensive experience in the industry.

“We are pleased to be partnering with management of Triax to support the acquisition of the Spear product line,” said John Shulman, Managing Director of Allied Capital. “Spear’s products are clinically proven to be effective and enjoy strong competitive market positions. The management team is experienced in this field and we look forward to them building on this solid platform of dermatology products.”

“We chose Allied Capital to be our partner because of its balance sheet strength, strong partnership philosophy, and long term approach to building value,” said Joe Krivulka, President and CEO of Triax. “With Allied Capital’s long history of supporting the growth of entrepreneurial middle market companies, we believe we have the ideal partner with whom to build a successful pharmaceutical business.”

In connection with the transaction, Triax secured $56.0 million of senior debt financing through Callidus Capital Finance, LLC, which will syndicate a portion of the facility post-closing.

About Allied Capital

Allied Capital Corporation, a leading business development company with total assets of more than $3 billion, has paid regular, quarterly cash dividends to shareholders since 1963. Allied Capital invests in the American entrepreneurial economy by providing capital to companies seeking a long-term financial partner and access to managerial resources often unavailable to smaller companies. Since its IPO in 1960, the Company has provided long-term debt and equity financing to thousands of middle market companies. In serving its shareholders, Allied Capital helps build middle market businesses and support American jobs. The Company’s private finance portfolio includes investments in over 100 companies that generate aggregate revenues of more than $10 billion and employ more than 80,000 people. Headquartered in Washington, DC, Allied Capital offers shareholders the opportunity to participate in the private equity industry through an investment in the Company’s New York Stock Exchange-listed stock, which is traded under the symbol ALD.

For more information, please visit www.alliedcapital.com, call Allied Capital investor relations toll-free at (888) 818-5298, or e-mail us at ir@alliedcapital.com. All media inquiries should be directed to Stan Collender of Financial Dynamics at (202) 434-0601.

About Spear Pharmaceuticals, Inc.

Founded in 1993 by the dermatologist K.L. Spear, Spear Pharmaceuticals began developing generic topical retinoids for the treatment of acne in 1993 and received ANDA approvals for three cream products in 1998 after successful clinical trials. Spear received ANDA approval for its two gel products in 2000 and 2002. For more information, visit www.spearpharmaceuticals.com.

Forward-Looking Statements

The information contained in this press release contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements, and these factors are enumerated in the company’s periodic filings with the Securities and Exchange Commission.