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Classic Media Gets Major Monetary Backing

Classic Media Inc. announced that Spectrum Equity Investors, along with existing investors led by Pegasus Capital Advisors, have agreed to recapitalize Classic to fund future growth and acquisitions. Under the terms of the recapitalization, Spectrum has invested $75 million of equity and arranged a new $100 million senior debt facility for Classic, provided by banks led by J.P. Morgan. Spectrum Equity will become majority owner and join the Classic Media board along with the existing investors and management, which includes Random House Ventures.

Classic Media owns and manages one of the most extensive and recognizable libraries in family entertainment with more than 3,000 titles comprised of movies, TV specials, live-action and animated TV series. The company's diverse collection of popular characters includes Lassie, The Lone Ranger, Underdog, Casper the Friendly Ghost, Richie Rich, Frosty the Snowman, and Rocky & Bullwinkle. Classic Media also recently acquired Big Idea and the best-selling VEGGIETALES brand, which has sold more than 40 million home videos. The company is the world's third largest comic books rights holder, owning Harvey, Dell and Gold Key comics. With Random House, also a shareholder in Classic Media, the company owns Golden Books and media rights in its vast publishing catalog.

Several feature film and TV projects are in the works, including an all-new LASSIE live-action movie to begin shooting on location in Ireland this spring and a new GERALD MCBOING BOING animated series, which premieres on Cartoon Network this fall.

"We are thrilled to be bringing Spectrum on board as our new financial partner. Their media and entertainment expertise and relationships, along with a proven track record of helping companies attain their goals, make Spectrum a perfect complement to our existing investors," said Eric Ellenbogen, chairman/ceo of Classic Media. "This agreement will provide us with additional capital to continue to build our business."

"Classic Media is an ideal platform for us because the company generates strong recurring cash flow from its existing library, while offering significant growth potential through the reintroduction of proven legacy products and titles to new audiences," said Robert Nicholson, general partner of Spectrum Equity Investors.

"We look forward to working with the company's management and Pegasus to build upon Classic's position as a leader in family-oriented entertainment," added Steven Price, general partner of Spectrum Equity. "Classic's growth strategy, which includes the acquisition of under-managed content libraries, will ensure the company adds valuable additions to its successful portfolio of family properties."

Bear, Stearns & Co. Inc. advised Classic Media on the transaction.

Spectrum Equity Investors is a leading private equity firm specializing in investments in the media, communications, entertainment and information and business services industries throughout North America and Western Europe. Founded in 1994 and based in Boston, New York and Menlo Park, Spectrum has more than $4 billion in capital under management. Spectrum's strategy is to invest substantial amounts of capital behind strong management teams and provide long-term and active board-level assistance to those teams to help them create and realize value. Significant investments include Eutelsat S.A., Loews Cineplex Ent., MyFamily.com Inc., Patriot Media and Communications, RiskMetrics Group Inc., Apprise Media Llc, CBD Media Llc, Consolidated Communications Inc., and NEP Inc.

Pegasus Capital Advisors L.P. is a private equity firm that manages more than $1.1 billion in assets and focuses on special situation investments in middle-market businesses. Founded in 1996, Pegasus is headquartered in Cos Cob, Connecticut. Pegasus has a flexible investment approach and provides creative and value-added solutions to companies. Portfolio investments take the form of buyouts, industry consolidations, growth capital or structured investments. Larger holdings include Coffeyville Resources Llc, Merisant Worldwide Inc., ImageSat International, N.V., Cannondale Bicycle Company and American Wholesale Insurance Group Inc.

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