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Kohlberg Capital Corporation Announces 2009 and First Quarter 2010 Financial Results

NEW YORK, Jun 1, 2010 (GlobeNewswire via COMTEX News Network) -- Kohlberg Capital Corporation (Nasdaq:KCAP) (the "Company") today issued this release announcing its 2009 and first quarter 2010 financial results.

Financial Highlights

For the Year Ended December 31, 2009:

  --  Net income was approximately $34 million, or $1.56 per share.
  --  Net investment income was approximately $18 million, or $0.83 per share.
  --  The Company declared dividends of $0.92 per share.
  --  Net unrealized gain on investments was $32 million, or $1.44 per share.
  --  Net realized losses on investments were $16 million, or $0.72 per share.
  --  At December 31, 2009, the fair value of the Company's investments
      totaled $409 million.
  --  Net asset value per share was $9.56 as of December 31, 2009 as compared
      to a restated $9.03 as of December 31, 2008.
  --  Accrued fees due to Katonah Debt Advisors, the Company's wholly owned
      asset manager, were approximately $5 million.


For the Quarter March 31, 2010:

  --  Net income was approximately $2 million, or $0.07 per share.
  --  Net investment income was $3 million, or $0.11 per share.
  --  The Company declared dividends of $0.17 per share.
  --  Net unrealized gain on investments was approximately $1 million.
  --  Net realized losses were approximately $2 million.
  --  At March 31, 2010, the fair value of the Company's investments totaled
      $410 million.
  --  Net asset value per share was $9.62 as of March 31, 2010.
  --  Accrued fees due to Katonah Debt Advisors, the Company's wholly owned
      asset manager, were approximately $6 million.


"We are pleased that as of March 31, 2010 our investment portfolio continues to perform well and that our investments have benefited from the general recovery in values of corporate debt as a result of improved economic conditions," said Dayl Pearson, president and chief executive officer. "Debt securities made up approximately 68% of our investment portfolio, of which approximately 93% are secured loans. Our significant concentration in more senior securities coupled with significant asset diversity reflected in our average loan balances of approximately $4 million and loans spread across 25 different industries, have allowed us to maintain good portfolio quality in this difficult economic environment. During 2009, we had approximately $80 million of payoffs, paydowns or sales in our loan and debt securities portfolio which incurred losses of approximately $12 million, most of which was related to a handful of restructured or problem assets."

On May 28, 2010, the Company filed with the Securities and Exchange Commission amended Quarterly Reports on Form 10-Q/A for the quarterly periods ended March 31, 2009 and June 30, 2009, a Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009, an Annual Report on Form 10-K for the year ended December 31, 2009, and a Quarterly Report on Form 10-Q for the three months ended March 31, 2010. These filings reflect restated financial information for 2008, including each of the four quarters in 2008, as well as the first two quarters of 2009. The Company's previously filed Annual Report on Form 10-K for the year ended December 31, 2008 and previously filed Quarterly Reports on Form 10-Q for the quarterly periods in 2008 have not been amended for the restatement affecting 2008 and should not be relied upon. All figures reported in this press release for the year ended December 31, 2008 and for the three months ended March 31, 2009 are restated.

"We restated the fair values of certain investments for 2008, including each of the quarterly periods in 2008, and the first half of 2009 to correct errors in the application of accounting for the fair value of our illiquid investments and the revenue recognition for certain non-cash payment-in-kind, or PIK, investments," added Michael Wirth, chief financial officer. "The restatement in 2008 did not impact net investment income but did impact our net asset value -- at December 31, 2008 our restated asset value was $9.03 per share as compared to a previously reported $11.68. The change in fair value was primarily due to the application of a market yield approach to valuing the our illiquid debt investments, which discounts the estimated contractual cash flows for the underlying assets with discount rates imputed by broad market indices, bond spreads and yields for comparable issuers relative to the subject assets. Like our restatement for 2008, our restatement of the first two quarters of 2009 reflect a restatement in the amount of unrealized losses reported for our illiquid investments but also reflects a restatement of net investment income, the cost basis and the net change in unrealized appreciation related to certain non-cash PIK investments. As of March 31, 2010, our net asset value had increased to $9.62 per share as market conditions continue to improve. Additionally, we have substantially reduced leverage on our balance sheet from borrowings of $262 million at the end of 2008 to less than $162 million at the end of May 2010." No financial statements for periods ended prior to January 1, 2008 are impacted by the restatement. For more detailed information about the restatement, please see our recent filings with the Securities and Exchange Commission.

Operating Results for the Year Ended December 31, 2009

For the year ended December 31, 2009, the Company reported total investment income of approximately $34 million compared to approximately $49 million in the prior year period. Investment income from debt securities decreased approximately $9 million, from approximately $33 million in 2008 to approximately $24 million in 2009 primarily due to reduced interest spreads and a decline in debt securities investments from approximately $354 million at the end of 2008 to approximately $297 million at December 31, 2009. Investment income from CLO fund securities decreased approximately $4 million, from approximately $13 million in 2008 to approximately $9 million in 2009 reflecting the temporary suspension of distributions to junior securities from certain CLO fund investments in order to repay indebtedness and thus de-lever those CLO funds. Although some of the Company's older CLO fund securities ceased paying equity distributions during the course of 2009 in order to de-lever the CLO bond structure, 87% of the Company's CLO fund securities at fair value continued to generate distributions averaging an approximate 19% annual return based on their fourth quarter payment to year-end fair value.

Expenses for 2009 totaled approximately $16 million as compared to approximately $19 million in 2008. The decrease in expenses was primarily due to an approximate $2 million decrease in interest expense -- resulting from an approximate $6 million reduction in interest expense as a result of lower outstanding balances offset by over $4 million of higher interest costs, being paid under protest, on the Company's debt facility beginning in June 2009 due to a dispute with the Company's lenders (discussed further below). Realized losses in 2009 were approximately $16 million as compared to realized losses of approximately $575,000 in 2008. Net investment income for the year was approximately $18 million, or $0.83 per share, compared to approximately $31 million, or $1.50 per share in 2008.

The net change in unrealized gain for the year ended December 31, 2009 totaled approximately $32 million reflecting approximately $18 million in increased fair value of the Company's middle market corporate loan and equity securities, an approximate $12 million increase in the fair value of CLO fund securities, and an approximate $2 million increase in the fair value of the Company's investment in its wholly-owned asset management company, Katonah Debt Advisors. The fair value of the Company's investment portfolio was positively impacted by an improvement in credit market conditions and thus value in 2009 as compared to December 2008.

Investment Portfolio for the Year Ended December 31, 2009

Kohlberg Capital Corporation's portfolio fair value was approximately $409 million as of December 31, 2009. The following table shows the composition of the Company's portfolio by security type at December 31, 2009 as compared to the prior year ended December 31, 2008:


                                      December 31, 2009             December 31, 2008 (as restated)
                             -----------------------------------  -----------------------------------

  Security Type                   Cost       Fair Value     %1         Cost       Fair Value     %1
                             -------------  -------------  -----  -------------  -------------  -----
  Time Deposits                       $126           $126    --%    $12,185,996    $12,185,996     3%
  Money Market Account                  --             --     --             10             10     --
  Senior Secured Loan          179,425,767    159,075,586     39    235,123,695    204,210,564     44
  Junior Secured Loan          129,016,237    114,920,499     28    143,370,524    115,894,790     25
  Mezzanine Investment          28,606,852     19,235,444      5     37,097,183     30,208,653      7
  Senior Subordinated Bond       3,007,167      2,415,000      1      3,008,197      1,305,000     --
  Senior Unsecured Bond          2,000,000      1,710,000     --      5,259,487      2,240,000     --
  CLO Fund Securities           68,195,049     48,971,000     12     66,376,595     34,640,000      8
  Equity Securities             12,365,603      4,713,246      1      5,256,659      5,089,365      1

  Affiliate Asset Managers      40,751,511     58,064,720     14     38,948,271     54,734,812     12
                             -------------  -------------  -----  -------------  -------------  -----

  Total                       $463,368,312   $409,105,621   100%   $546,626,617   $460,509,190   100%
                             =============  =============  =====  =============  =============  =====


  -------------------------
  1 Represents percentage of total portfolio at fair value.

The Company's loan, bond and equity portfolio (excluding its investment in CLO fund securities, short-term investments and affiliate asset managers discussed further below), as of December 31, 2009 totaled $302 million at fair value, of which 91% were secured loans. The cost of such investments was $354 million, representing a fair value discount to cost of 15% or approximately $2.34 per outstanding share. The weighted average yield on the Company's loan and bond portfolio at December 31, 2009 was approximately 6.2%.

The Company's portfolio of middle market corporate loan and debt securities at year end, representing 73% of the total investment portfolio, was well-varied across 26 different industries and 74 different entities with an average balance per entity of approximately $4 million. As of December 31, 2009, all but ten issuers or approximately 2% of total investments at fair value were current on their debt service obligations.

Investment in CLO Fund Securities for the Year Ended December 31, 2009

As of December 31, 2009, the Company's investment at fair value in CLO fund securities was approximately $49 million. The underlying assets in each of the CLO funds are generally diversified secured and unsecured corporate debt and do not include any asset backed securities, such as those secured by commercial or residential mortgages. During 2009, rating downgrades of underlying loan assets in certain of the Company's older CLO funds resulted in the temporary suspension of distributions to the junior CLO fund securities in the Company's investment portfolio in order to allow the CLO fund to repay indebtedness and thus de-lever such CLO funds. During 2009, the CLO fund securities that were not affected by the temporary suspensions had annualized cash returns ranging from 14% to 167% based on their quarterly cash payment to fair value at the time.

Investment in Asset Manager Affiliate for the Year Ended December 31, 2009

At December 31, 2009, the Company's investment at fair value in affiliate asset managers, including Katonah Debt Advisors, was approximately $58 million. Katonah Debt Advisors' assets under management at December 31, 2009 totaled approximately $2.1 billion, which did not change significantly from December 31, 2008.

Operating Results for the Quarter Ended March 31, 2010

For the three months ended March 31, 2010, the Company reported total investment income of approximately $7 million compared to approximately $9 million in the prior year period. Investment income from debt securities decreased approximately $2 million, from approximately $7 million in 2009 to approximately $5 million in 2010 due to a reduction in size of our loan portfolio as a result of paydowns and asset sales. In addition, investment income from CLO fund securities for the three months ended March 31, 2010 was approximately $2 million, a decrease of approximately $447,000 compared to the first quarter of 2009. As in the first quarter of 2009, the Company continued to have certain older CLO fund securities temporarily suspend their distributions to junior securities in order to de-lever those CLO funds. Approximately 81% of the Company's CLO fund securities at fair value continued to generate distributions averaging an approximate 19% annual return based on their current quarter payment to quarter-end fair value.

Expenses for the three months ended March 31, 2010 totaled approximately $4 million as compared to approximately $3 million for the same period in 2009. The increase in expenses is primarily attributed to an approximate $1 million increase in interest expense, being paid under protest, on the Company's debt facility due to a dispute with the Company's lenders offset by a decrease in the average outstanding balance for the current quarter compared to the prior year. Realized losses for the three months ended March 31, 2010 and March 31, 2009 were relatively unchanged at approximately $2 million. Net investment income for the three months ended March 31, 2010 was approximately $3 million, or $0.11 per share, compared to approximately $6 million, or $0.30 per share for the three months ended March 31, 2009.

The net change in unrealized gains for the three months ended March 31, 2010 totaled approximately $1 million reflecting approximately $4 million in increased fair value of the Company's middle market corporate debt and equity securities, an approximate $2 million increase in fair value of CLO fund securities, and a $5 million decrease in the unrealized gain in the Company's investment in its wholly-owned asset management company, Katonah Debt Advisors.

Investment Portfolio for the Quarter Ended March 31, 2010

Kohlberg Capital Corporation's portfolio fair value was $410 million as of March 31, 2010. The following table shows the composition of the Company's portfolio by security type at March 31, 2010 as compared to the prior year ended December 31, 2009:


                                     March 31, 2010                  December 31, 2009
                            --------------------------------  --------------------------------

  Security Type                 Cost       Fair Value    %1       Cost       Fair Value    %1
                            ------------  ------------  ----  ------------  ------------  ----
  Time Deposits              $20,055,211   $20,055,211    5%         $ 126         $ 126   --%
  Money Market Account           216,099       216,099    --            --            --    --
  Senior Secured Loan        159,661,792   143,269,131    35   179,425,767   159,075,586    39
  Junior Secured Loan        127,591,676   113,403,940    28   129,016,237   114,920,499    28
  Mezzanine Investment        25,623,318    15,528,492     4    28,606,852    19,235,444     5
  Senior Subordinated Bond     4,206,913     3,870,000     1     3,007,167     2,415,000     1
  Senior Unsecured Bond               --            --    --     2,000,000     1,710,000    --
  Preferred Stock                400,000       381,600    --            --            --    --
  CLO Fund Securities         68,215,662    51,681,000    13    68,195,049    48,971,000    12
  Equity Securities           13,543,343     5,901,400     1    12,365,603     4,713,246     1

  Affiliate Asset Managers    43,308,942    55,541,948    13    40,751,511    58,064,720    14
                            ------------  ------------  ----  ------------  ------------  ----

  Total                     $462,822,956  $409,848,821  100%  $463,368,312  $409,105,621  100%
                            ============  ============  ====  ============  ============  ====


  ------------------------
  1 Represents percentage of total portfolio at fair value.

The Company's loan, bond and equity portfolio (excluding its investment in CLO fund securities, short-term investments and affiliate asset managers discussed further below), as of March 31, 2010 totaled $282 million at fair value, of which 91% were secured loans. The cost of such investments was $331 million, representing a fair value discount to cost of 15% or approximately $2.17 per outstanding share. The weighted average yield on the Company's loan and bond portfolio at March 31, 2010 was approximately 5.5%.

The Company's portfolio of middle market corporate loan and debt securities at quarter end, representing 68% of the total investment portfolio, was well-varied across 25 different industries and 71 different entities with an average balance per entity of approximately $4 million. As of March 31, 2010, all but eight issuers or approximately 3% of total investments at fair value were current on their debt service obligations.

Investment in CLO Fund Securities for the Quarter Ended March 31, 2010

As of March 31, 2010, the Company's investment at fair value in CLO fund securities was approximately $52 million. The underlying assets in each of the CLO funds are generally diversified secured and unsecured corporate debt and do not include any asset backed securities, such as those secured by commercial or residential mortgages. Although CLO fund securities continue to experience manageable default rates and strong net interest cash flows, rating downgrades of underlying loan assets in certain of the Company's older CLO funds resulted in the temporary suspension of distributions to the junior CLO fund securities in the Company's investment portfolio in order to repay indebtedness and thus de-lever such CLO funds. Our largest two CLO fund investments, Katonah X CLO Ltd. and Katonah 2007-1 CLO Ltd., both managed by our wholly-owned asset manager, Katonah Debt Advisors, represented 80% of our investments in CLO fund securities at March 31, 2010, have performed since inception and have not been subject to any suspension of distributions. The Grant Grove investment resumed its distributions to the junior CLO fund securities held by the Company in the second quarter of 2010. The Company currently expects that the other CLO funds managed by Katonah Debt Advisors that were subject to temporary suspensions of distributions to junior CLO fund securities will resume their distributions to the junior CLO Fund securities held by the Company during 2010.

Investment in Asset Manager Affiliate for the Quarter Ended March 31, 2010

At March 31, 2010, the Company's investment at fair value in affiliate asset managers, including Katonah Debt Advisors, was approximately $56 million as compared to approximately $58 million at December 31, 2009. Katonah Debt Advisors' assets under management at March 31, 2010 totaled approximately $2.1 billion. During 2009 and 2010, certain CLO funds deferred the payment of their subordinate management fees (senior management fees have all been paid on a current basis) to Katonah Debt Advisors. As of March 31, 2010, total accrued fees owed to Katonah Debt Advisors totaled approximately $6 million. The Company currently expects approximately $5 million of such accrued subordinate fees to be distributed to Katonah Debt Advisors during 2010. The payments of such fees could be available for distribution to the Company as investment income (dividend from affiliate).

Impact of Restatement on Prior Period Financial Results

The Company restated its financial results for the quarterly and annual periods in 2008 and for the quarterly periods ended March 31, 2009 and June 30, 2009, due to errors in the application of accounting for the fair value of its illiquid investments and revenue recognition for certain non-cash payment-in-kind investments. The restatement, relating to fair value adjustments, did not impact net investment income in 2008. As of December 31, 2008, the fair value restatement reduced the value of the Company's debt and equity securities portfolio by approximately $30 million, the Company's CLO fund securities by approximately $22 million and affiliate investments by approximately $2 million. As a result of these fair value adjustments, NAV per share as of December 31, 2008 was $9.03.

The restatement related to the three months ended March 31, 2009 also relate to fair value adjustments as well as revenue recognition for certain non-cash payment-in-kind investments. As a result of the restatement, net investment income for the period was reduced by $0.02 per share to $0.30 per share for the period and NAV per share as of March 31, 2009 was restated to $9.41.

The restatement related to the three months ended June 30, 2009 also relate to fair value adjustments as well as revenue recognition for certain non-cash payment-in-kind investments. As a result of the restatement, net investment income for the period was reduced by $0.03 per share to $0.26 per share for the period and NAV per share as of June 30, 2009 was restated to $9.73.

Liquidity and Capital Resources

At March 31, 2010, Kohlberg Capital had unrestricted cash and time deposits of approximately $8 million, total assets of approximately $417 million and stockholders' equity of $216 million. The Company's net asset value per common share was $9.62. Debt outstanding under our secured credit facility (the "Facility") was $199 million, resulting in 209% asset coverage ratio and a debt to equity ratio of 92%. Debt outstanding as of May 31, 2010 is less than $162 million.

In accordance with the terms of the agreements governing the Facility (the "LFSA"), the financial assets acquired with the proceeds of borrowings under the LFSA are held in a securities account and are subject to a securities account control agreement granting the Agent certain rights in respect of such securities account and the financial assets held therein. As of March 31, 2010 there were financial assets held in the securities account with a market value of approximately $273 million. Borrowings under the Facility are secured only by these assets and amounts in respect of such assets and the Facility lenders do not have recourse to any other of our assets. The assets securing the Facility represent approximately 65% of our total assets (at fair value) at March 31, 2010 and contributed approximately 62% of our investment income for the three months ended March 31, 2010. The Facility contains collateral requirements, including, but not limited to, minimum diversity, rating and yield, and limitations on loan size.

In August 2008, we were notified by the lenders that the banks providing the underlying liquidity for the Facility did not intend to renew their liquidity facility to the lenders unless we agreed to certain revised terms for the Facility. The lenders proposed new terms to us as a condition to extending the underlying liquidity purchase agreements. We viewed such proposed terms as unfavorable and did not agree to such new terms, causing the agent under the Facility (the"Agent") and the lenders to declare a termination date based upon their contention that the underlying liquidity purchase agreements had expired, thereby terminating our ability to obtain revolving advances and commencing the amortization of existing borrowings under the Facility. On June 9, 2009, we received a letter from a representative of the lenders alleging that our failure to determine ratings on certain pledged loans and our alleged breach of certain covenants had resulted in the occurrence of a Termination Event under the LFSA and that, as a result, the interest payable under the LFSA would be calculated at the higher default rate (equal to 0.85% above the prime rate plus 0.75%) applicable to periods during which a Termination Event had occurred and was continuing. In a letter dated June 11, 2009, we rejected the alleged breaches and the alleged occurrence of a Termination Event and also asserted that the termination of the revolving period and commencement of the amortization period under the LFSA were wrongful. On August 28, 2009, we filed a complaint in the Supreme Court of the State of New York against the Agent and other lender parties to the LFSA. The complaint reflects our beliefs that the termination of the revolving period and commencement of the amortization period under the LFSA were wrongful and that the assertions of alleged breaches of our obligations under the LFSA and the alleged occurrence of Termination Event(s) were without merit. The complaint also seeks to clarify our rights and obligations under the LFSA.

Since the time the complaint was filed, the Agent, the lenders, and the lender agent parties to the LFSA have served answers seeking dismissal of the complaint and recovery of the defendants' attorneys' fees and costs in the action and discovery has commenced. The Agent has sent additional notices of Termination Events, which we believe and have asserted are without merit, based on our alleged inability to comply with certain covenants under the Facility due to the wrongful declaration of a Termination Date, the accompanying termination of the revolving period and commencement of the amortization period. In addition, on April 2, 2010 the Agent sent a notice alleging that our failure to timely deliver annual audited financial statements for the year ended December 31, 2009 would, unless cured within 30 days of the date of the notice, constitute a Termination Event, which we also believe and have asserted is without merit based upon a non-material delay.

Since September 2008, all principal and excess interest collected from the assets securing the Facility have been and continue to be used to amortize the Facility through a maturity date of September 29, 2010 (the last day of the amortization period that the Company has challenged as being wrongfully commenced). Since June 2009, based on the Agent's assertion (despite our disagreement with such assertion) that a Termination Event occurred, the interest payable under the LFSA has been calculated at an elevated rate (equal to 0.85 % above the prime rate plus 0.75%), and we have been paying interest calculated at such higher rate under protest. Also, despite our belief that the amortization period has been wrongfully imposed, we believe we have sufficient cash and liquid assets which could be sold, potentially at a loss, to generate cash to fund normal operations and dividend distributions during the amortization period. At the end of the amortization period, we may be required to sell or transfer the remaining assets securing the Facility, potentially at a loss, to repay any remaining outstanding borrowings or we may enter into a new agreement with the lenders providing for continued amortization of the Facility borrowings or into alternative financing arrangements with another lender.

Under the Facility, the Company is subject to various covenants including a leverage ratio covenant pursuant to which it must maintain a leverage ratio of no more than one to one based on the ratio of the Facility's outstanding balance to the Company's GAAP stockholders' equity balance. As of April 30, 2010, the Company's leverage ratio did not exceed 1:1.

There can be no assurance that in connection with the lawsuit referred to above or otherwise the Agent and the lenders will not assert additional breaches of the Facility, including breaches relating to the restatement described above, and there can be no assurance that the Agent and the lenders will not assert that any such breaches give rise to a Termination Event. While the Company and the borrower believe that they have meritorious claims against the Agent and the lenders in the pending lawsuit and, as a result, the breaches alleged by the Agent and the lenders are not valid in accordance with the terms of the LFSA, there is no assurance that the Company and the borrower will prevail in such litigation. If the Company and the borrower do not prevail, the Agent and the lenders may seek to pursue claims based on the alleged breaches, including claims involving a Termination Event. If the Agent and the lenders were to seek to accelerate and seize the collateral either at the end of the amortization period (which the Company has challenged as being wrongfully commenced) or otherwise, and the Company was unsuccessful in obtaining court relief, the Company could be forced to pay the remaining balance of the Facility (approximately $187 million as of April 30, 2010), which would adversely affect our business, liquidity, financial condition and results of operations.

We are currently using any income generated by the assets collateralizing the Facility to pay principal, interest and other expenses of the Facility -- despite the fact that, if we want to remain a registered investment company and continue to be afforded favorable tax treatment for U.S. federal income tax purposes, we are required to distribute to the shareholders substantially all of our investment company taxable income, including the net amounts generated by the collateralized assets. These collateralized assets with a market value of approximately $273 million represent approximately 65% of our total assets (at fair value) at March 31, 2010 and contributed approximately 62% of the Company's investment income for the quarter ended March 31, 2010. Because we are using net interest income earned on the assets securing the Facility to amortize the Facility during the amortization period (which the Company has challenged as being wrongfully commenced), we may need to sell other assets not pledged to the Facility, potentially at a loss, in order to generate sufficient cash to make the required dividend distributions necessary to maintain our registered investment company status. In addition, at the end of the amortization period, we may be required to sell or transfer the remaining assets securing the Facility, potentially at a loss, to repay any remaining outstanding borrowings. Any such asset sale could adversely affect our business, liquidity, financial condition and results of operations. We expect that our cash on hand, liquid investments, and cash generated from operations, including income earned from investments and any income distributions made by Katonah Debt Advisors, our wholly-owned portfolio company, will be adequate to meet our liquidity needs and distribution requirements over the next twelve months.

Dividend

Generally, the Company seeks to fund dividends to shareholders from current and distributable earnings, primarily from net interest and dividend income generated by its investment portfolio and any distributions from Katonah Debt Advisors. The Company announced a regular quarterly dividend of $0.17 per share on March 19, 2009. The record date for this dividend was April 7, 2010 and the dividend was paid on April 29, 2010. For the quarter ended March 31, 2010, the Company's net investment income was $0.11 per share. Tax characteristics of all dividends will be reported to stockholders on form 1099-DIV after the end of the calendar year.

The Company has adopted a dividend reinvestment plan that provides for reinvestment of our dividends on behalf of our stockholders, unless a stockholder elects to receive cash. As a result, if we declare a cash dividend, our stockholders who have not "opted out" of our dividend reinvestment plan will have their cash dividends automatically reinvested in additional shares of our common stock, rather than receiving the cash dividends. Please contact your broker or other financial intermediary for more information regarding the dividend reinvestment plan.

Conference Call and Webcast

Kohlberg Capital Corporation will hold a conference call on Tuesday, June 1, 2010 at 4:30 p.m. Eastern Daylight Time to discuss its annual 2009 and first quarter 2010 financial results. Shareholders, prospective shareholders and analysts are welcome to listen to the call or attend the webcast. The conference call dial-in number is 877-710-0209. A replay of the call will be available from 7:30 p.m. on June 1, 2010 until 11:59 p.m. Eastern Daylight Time on June 8, 2010. The dial in number for the replay is 800-642-1687 and the conference ID is 78607710. Additional information regarding the fair value of the Company's debt investments can also be found on the Company's website http://www.kohlbergcapital.com in the Investor Relations section under Events.

A live audio webcast of the conference call can be accessed via the Internet, on a listen-only basis on our Company's website http://www.kohlbergcapital.com in the Investor Relations section under Events. Please allow extra time, prior to the call, to visit the site and test your connection or download the necessary software to listen to the Internet broadcast. The online archive of the webcast will be available for approximately 90 days on our website in the Investor Relations section under Events.

About Kohlberg Capital Corporation (KCAP)

Kohlberg Capital Corporation is a publicly traded, internally managed business development company. Our middle market investment business originates, structures, finances and manages a portfolio of term loans, mezzanine investments and selected equity securities in middle market companies. Our wholly-owned portfolio company, Katonah Debt Advisors, manages CLO Funds that invest in broadly syndicated corporate term loans, high-yield bonds and other credit instruments.

Kohlberg Capital Corporation's filings with the Securities and Exchange Commission, earnings releases, press releases and other financial, operational and governance information are available on the Company's website at http://www.kohlbergcapital.com.

The Kohlberg Capital logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3121

Forward Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act. The matters discussed in this press release, as well as in future oral and written statements by management of Kohlberg Capital Corporation, that are forward-looking statements are based on current management expectations that involve substantial risks and uncertainties which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. Forward-looking statements relate to future events or our future financial performance. We generally identify forward-looking statements by terminology such as "may,'' "will,'' "should,'' "expects,'' "plans,'' "anticipates,'' "could,'' "intends,'' "target,'' "projects,'' "contemplates,'' "believes,'' "estimates,'' "predicts,'' "potential'' or "continue'' or the negative of these terms or other similar words. Important assumptions include our ability to originate new investments, achieve certain margins and levels of profitability, the availability of additional capital, and the ability to maintain certain debt to asset ratios. In light of these and other uncertainties, the inclusion of a projection or forward-looking statement in this press release should not be regarded as a representation by us that our plans or objectives will be achieved. Further information about factors that could affect our financial and other results is included in our filings with the Securities and Exchange Commission. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.


                      KOHLBERG CAPITAL CORPORATION
                             BALANCE SHEETS


                                             As of           As of
                                         December 31,    December 31,
                                             2009            2008
                                        --------------  --------------
                                                         (as restated)
  ASSETS
  Investments at fair value:
    Time deposits (cost: 2009 -- $126;
     2008 -- $12,185,996)                        $ 126    $ 12,185,996
    Money market account (cost: 2009
     -- $00; 2008 -- $10)                           --              10
    Debt securities (cost: 2009 --
     $342,056,023; 2008 --
     $423,859,086)                         297,356,529     353,859,007
    CLO fund securities managed by
     non-affiliates
    (cost: 2009 -- $15,685,858; 2008
     -- $15,590,951)                         4,021,000       4,400,000
    CLO fund securities managed by
     affiliate
    (cost: 2009 -- $52,509,191; 2008
     -- $50,785,644)                        44,950,000      30,240,000
    Equity securities (cost: 2009 --
     $12,365,603; 2008 -- $5,256,659)        4,713,246       5,089,365
    Asset manager affiliates (cost:
     2009 -- $40,751,511; 2008 --
     $38,948,271)                           58,064,720      54,734,812
                                        --------------  --------------
  Total Investments at fair value          409,105,621     460,509,190
  Cash                                       4,140,408         251,412
  Restricted cash                           18,696,023       2,119,991
  Interest and dividends receivable          3,836,031       4,168,599
  Receivable for open trades                 2,953,500              --
  Due from affiliates                           44,274         390,590

  Other assets                                 640,200       1,716,447
                                        --------------  --------------

  Total assets                           $ 439,416,057   $ 469,156,229
                                        ==============  ==============

  LIABILITIES
  Borrowings                             $ 218,050,363   $ 261,691,148
  Payable for open trades                           --       1,955,000
  Accounts payable and accrued
   expenses                                  3,057,742       3,064,403

  Dividend payable                           4,412,228       5,879,660
                                        --------------  --------------

  Total liabilities                      $ 225,520,333   $ 272,590,211
                                        --------------  --------------
  Commitments and contingencies

  STOCKHOLDERS' EQUITY
  Common stock, par value $0.01 per
   share, 100,000,000 common shares
   authorized;
  22,363,281 and 21,776,519  common
   shares issued and outstanding at
  December 31, 2009 and December 31,
   2008, respectively                        $ 220,611       $ 214,369
  Capital in excess of par value           283,074,233     280,284,330
  Accumulated undistributed net
   investment income                         1,326,380       2,865,434
  Accumulated net realized losses         (16,462,808)       (680,687)
  Net unrealized depreciation on
   investments                            (54,262,692)    (86,117,428)
                                        --------------  --------------


  Total stockholders' equity             $ 213,895,724   $ 196,566,018
                                        --------------  --------------

  Total liabilities and stockholders'
   equity                                $ 439,416,057   $ 469,156,229
                                        ==============  ==============


  NET ASSET VALUE PER COMMON SHARE               $9.56           $9.03
                                        ==============  ==============




                               KOHLBERG CAPITAL CORPORATION
                                 STATEMENTS OF OPERATIONS


                                                    For the Years Ended December 31,
                                               ------------------------------------------

                                                   2009           2008           2007
                                               ------------  --------------  ------------
                                                              (as restated)



  Investment Income:
    Interest from investments in debt
     securities                                 $24,157,213     $33,386,213   $29,606,231
    Interest from cash and time deposits             17,956         251,287       552,509
    Dividends from investments in CLO fund
     securities managed by non-affiliates         1,296,349       5,946,736     4,528,021
    Dividends from investments in CLO fund
     securities managed by affiliate              8,025,695       6,624,742     2,532,952
    Dividends from affiliate asset manager               --       1,350,000       500,000

    Capital structuring service fees                399,338       1,653,232       759,301
                                               ------------  --------------  ------------

      Total investment income                    33,896,551      49,212,210    38,479,014
                                               ------------  --------------  ------------

  Expenses:
    Interest and amortization of debt
     issuance costs                               9,276,563      10,925,624     7,229,597
    Compensation                                  3,222,604       3,940,638     4,104,761
    Professional fees                             1,691,832       1,992,142     2,887,515
    Insurance                                       359,062         286,456       174,647

    Administrative and other                        990,835       1,361,433     1,323,545
                                               ------------  --------------  ------------

      Total expenses                             15,540,896      18,506,293    15,720,065
                                               ------------  --------------  ------------

  Net Investment Income before Income Tax
   Expense                                       18,355,655      30,705,917    22,758,949

    Excise taxes                                   (25,000)              --            --
                                               ------------  --------------  ------------
  Net Investment Income                          18,330,655      30,705,917    22,758,949
  Realized And Unrealized Gains (Losses) On
   Investments:
    Net realized gain (loss) from investment
     transactions                              (15,782,121)       (575,179)       266,317
    Net change in unrealized appreciation
     (depreciation) on:
      Debt securities                            25,300,586    (57,514,397)  (12,485,682)
      Equity securities                         (7,485,064)         124,406     (291,700)
      CLO fund securities managed by
       affiliate                                 12,986,453    (20,989,960)       444,316
      CLO fund securities managed by
       non-affiliates                             (473,907)     (5,705,371)   (5,485,580)

      Affiliate asset manager investments         1,526,668     (9,328,824)    20,935,365
                                               ------------  --------------  ------------
      Net realized and unrealized
       appreciation (depreciation) on
       investments                               16,072,615    (93,989,325)     3,383,036
                                               ------------  --------------  ------------

  Net Increase (Decrease) In Stockholders'
   Equity Resulting From Operations             $34,403,270  $ (63,283,408)   $26,141,985
                                               ============  ==============  ============

    Net Increase (Decrease) in Stockholders'
     Equity Resulting from Operations per
     Common Share--Basic and Diluted                  $1.56        $ (3.09)         $1.45
    Net Investment Income Per Common
     Share--Basic and Diluted                         $0.83           $1.50         $1.27
    Net Investment Income and Net Realized
     Gains (Losses) Per Common Share--Basic
     and Diluted                                      $0.12           $1.47         $1.28

    Weighted Average Shares of Common Stock
     Outstanding--Basic and Diluted              22,105,800      20,455,322    17,977,348



                       KOHLBERG CAPITAL CORPORATION
                             BALANCE SHEETS


                                                              As of
                                              As of       December 31,
                                         March 31, 2010       2009
                                         --------------  --------------
                                          (unaudited)
  ASSETS
  Investments at fair value:
    Time deposits (cost: 2010 --
     $20,055,211; 2009 -- $126)            $ 20,055,211           $ 126
    Money market account (cost: 2010 --
     $216,099; 2009 -- $0)                      216,099              --
    Debt securities (cost: 2010 --
     $317,483,699; 2009 --
     $423,271,710)                          276,453,163     297,356,529
    CLO fund securities managed by
     non-affiliates
    (cost: 2010 -- $15,686,805; 2009 --
     $15,541,828)                             4,661,000       4,021,000
    CLO fund securities managed by
     affiliate
    (cost: 2010 -- $52,528,857; 2009 --
     $50,466,193)                            47,020,000      44,950,000
    Equity securities (cost: 2010 --
     $13,543,343; 2009 -- $5,096,298)         5,901,400       4,713,246
    Asset manager affiliates (cost:
     2010 -- $43,308,942; 2009 --
     $40,751,511)                            55,541,948      58,064,720
                                         --------------  --------------
  Total Investments at fair value           409,848,821     409,105,621
  Cash                                          492,255       4,140,408
  Restricted cash                             2,474,052      18,696,023
  Interest and dividends receivable           3,700,553       3,836,031
  Receivable for open trades                         --       2,953,500
  Due from affiliates                                --          44,274

  Other assets                                  564,039         640,200
                                         --------------  --------------

  Total assets                            $ 417,079,720   $ 439,416,057
                                         ==============  ==============

  LIABILITIES
  Borrowings                              $ 198,648,255   $ 218,050,363
  Accounts payable and accrued expenses       2,220,657       3,057,742

  Dividend payable                                   --       4,412,228
                                         --------------  --------------

  Total liabilities                       $ 200,868,912   $ 225,520,333
                                         --------------  --------------
  Commitments and contingencies

  STOCKHOLDERS' EQUITY
  Common stock, par value $0.01 per
   share, 100,000,000
  common shares authorized; 22,475,339
   and 22,363,281
  common shares issued and outstanding
   at March 31, 2010
  and December 31, 2009, respectively         $ 221,732       $ 220,611
  Capital in excess of par value            283,793,286     283,074,233
  Accumulated undistributed net
   investment income                          3,904,874       1,326,380
  Accumulated net realized losses          (18,734,949)    (16,462,808)
  Net unrealized depreciation on
   investments                             (52,974,135)    (54,262,692)
                                         --------------  --------------


  Total stockholders' equity              $ 216,210,808   $ 213,895,724
                                         --------------  --------------

  Total liabilities and stockholders'
   equity                                 $ 417,079,720   $ 439,416,057
                                         ==============  ==============


  NET ASSET VALUE PER COMMON SHARE                $9.62           $9.56
                                         ==============  ==============



                     KOHLBERG CAPITAL CORPORATION
                       STATEMENTS OF OPERATIONS
                              (unaudited)


                                                Three Months Ended
                                                    March 31,
                                             ------------------------

                                                2010         2009
                                             -----------  -----------
                                                              (as
                                                           restated)
  Investment Income:
    Interest from investments in debt
     securities                               $4,782,363   $6,723,130
    Interest from cash and time deposits           6,083        4,670
    Dividends from investments in CLO fund
     securities managed by non-affiliates        348,874      480,392
    Dividends from investments in CLO fund
     securities managed by affiliate           1,811,894    2,127,326

    Capital structuring service fees              14,612      116,735
                                             -----------  -----------

      Total investment income                  6,963,826    9,452,253
                                             -----------  -----------

  Expenses:
    Interest and amortization of debt
     issuance costs                            2,696,351    1,508,011
    Compensation                                 787,691      800,968
    Professional fees                            508,518      336,329
    Insurance                                    102,318       91,763

    Administrative and other                     290,454      261,559
                                             -----------  -----------

      Total expenses                           4,385,332    2,998,630
                                             -----------  -----------

  Net Investment Income                        2,578,494    6,453,623
  Realized And Unrealized Gains (Losses) On
   Investments:
    Net realized gains (losses) from
     investment transactions                 (2,272,141)  (2,007,373)
    Net change in unrealized appreciation
     (depreciation) on:
      Debt securities                          3,668,958      651,599
      Equity securities                           10,414    (325,229)
      CLO fund securities managed by
       affiliate                               2,050,333    2,988,956
      CLO fund securities managed by
       non-affiliate                             639,054       32,684

      Affiliate asset manager investments    (5,080,203)    1,101,238
                                             -----------  -----------
       Net realized and unrealized
        depreciation on investments            (983,585)    2,441,875
                                             -----------  -----------

  Net Increase (Decrease) In Net Assets
   Resulting From Operations                  $1,594,909   $8,895,498
                                             ===========  ===========

    Net Increase (Decrease) In Net Assets
     Resulting from Operations per Common
     Share--Basic and Diluted                      $0.07        $0.40
    Net Investment Income Per Common
     Share--Basic and Diluted                      $0.11        $0.30
    Net Investment Income and Net Realized
     Gains/Losses Per Common Share--Basic
     and Diluted                                   $0.01        $0.20

    Weighted Average Shares of Common Stock
     Outstanding--Basic and Diluted           22,445,457   21,867,006

Valuation of Portfolio Investments

Kohlberg Capital's Board of Directors is ultimately and solely responsible for making a good faith determination of the fair value of portfolio investments on a quarterly basis. Please see the Company's annual and quarterly report filings with the Securities and Exchange Commission for information regarding the Company's valuation methodology and procedures.

KCAP-G

This news release was distributed by GlobeNewswire, www.globenewswire.com

SOURCE: Kohlberg Capital Corporation

CONTACT:  Kohlberg Capital Corporation
Investor Relations
Denise Rodriguez
(212) 455-8300
info@kohlbergcapital.com

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