American Capital Strategies Ltd has invested $31 million in children's apparel wholesaler and retailer Hartstrings Inc.

The finance will be used to partially finance the asset Hartstrings' acquisition by Keystone Holdings LLC.

Hartstrings is a designer, wholesaler and retailer of classic coordinated children's apparel sold under the hartstrings, kitestrings and kc parker labels. American Capital is funding a senior term loan, senior revolving credit bridge facility and a subordinated note with warrants.

Founded in 1980, Hartstrings opened the first of its 21 retail stores in 1986. It now has over 250 employees. Cash flows have risen steadily since 1996. Sales rose during the recent recession, with retail sales up nearly one-third from 1998 to 2001, and its earnings track record has been consistently strong and growing. The company's leading wholesale accounts include Nordstrom, Lord & Taylor, Saks Fifth Avenue and Neiman Marcus.