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Ares Capital Corporation Prices Public Offering of $1.00 Billion 5.875% Unsecured Notes Due 2029

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Ares Capital Corporation (ARCC) has priced an underwritten public offering of $1.00 billion in aggregate principal amount of 5.875% notes due 2029. The notes will mature on March 1, 2029, and may be redeemed in whole or in part at Ares Capital’s option at any time at par plus a 'make-whole' premium, if applicable. The offering is expected to close on January 23, 2024, subject to customary closing conditions. Ares Capital expects to use the net proceeds of this offering to repay certain outstanding indebtedness under its debt facilities.
Positive
  • Ares Capital Corporation (ARCC) has successfully priced a $1.00 billion public offering of 5.875% notes due 2029, indicating investor confidence in the company's future prospects.
Negative
  • The offering may lead to increased indebtedness for Ares Capital Corporation, which could impact its financial position and liquidity.

The pricing of the $1.00 billion underwritten public offering of 5.875% notes due 2029 by Ares Capital Corporation is a substantive financial event with potential reverberations across the capital structure of the company. The decision to issue debt is often a strategic move to optimize the capital allocation and manage the company's balance sheet. The interest rate of 5.875% is a critical figure, as it reflects the cost of capital for Ares Capital and is indicative of the market's perception of the company's creditworthiness.

Investors and analysts will closely scrutinize the offered yield in relation to current market rates for similar maturity and risk profiles. A yield significantly above market averages could suggest a higher perceived risk associated with Ares Capital, while a rate in line with or below market benchmarks could indicate strong investor confidence. Additionally, the involvement of a robust syndicate of joint book-running managers and lead managers signals a broad institutional interest in the offering and might help ensure its successful placement.

The use of proceeds to repay outstanding debt could be a strategic move to manage interest expenses and improve debt maturity profiles. However, it is essential to note that the re-borrowing provision for general corporate purposes, including investment in portfolio companies, indicates an ongoing need for liquidity and could imply future leveraging activities. This action should be monitored as it could affect the company's leverage ratios and ultimately its risk profile.

From a market perspective, the issuance of notes by Ares Capital Corporation provides insights into the broader credit market conditions and appetite for corporate debt. The size of the offering, $1.00 billion, is significant and can be seen as a gauge for the demand for middle-market debt instruments. The maturity date of 2029 gives a medium-term investment horizon, which may attract a different investor base compared to short-term or long-term debt.

Furthermore, the option to redeem the notes at par plus a 'make-whole' premium offers a glimpse into the company's strategic financial planning. This feature provides Ares Capital with the flexibility to manage its debt portfolio actively and potentially take advantage of future interest rate movements or changes in its own credit standing.

It is also worth considering the broader economic context in which this offering is taking place. In a rising interest rate environment, fixed-rate offerings such as this one might be more attractive to investors seeking to lock in rates before any further increases. The choice of a fixed rate over a variable one could reflect Ares Capital's outlook on future interest rate trends and its impact on the cost of debt servicing.

In the context of securities law and regulatory compliance, the issuance of notes by Ares Capital must adhere to strict guidelines as set forth by the Securities and Exchange Commission (SEC). The detailed filing of the pricing term sheet, preliminary prospectus supplement and the accompanying prospectus indicates the company's adherence to disclosure norms required for such offerings. These documents provide investors with essential information regarding the terms of the notes, the use of proceeds and the risks involved.

The legal framework surrounding 'make-whole' premiums is particularly intricate, as it involves contractual provisions designed to compensate the lender for potential losses in the event of early redemption. Investors and legal analysts will pay close attention to the terms of this provision, as it can significantly impact the total return of the investment. The presence of a 'make-whole' premium could also reflect the company's commitment to maintaining a stable debt profile and avoiding opportunistic debt retirements that could unfavorably affect the remaining bondholders.

NEW YORK--(BUSINESS WIRE)-- Ares Capital Corporation (Nasdaq: ARCC) announced that it has priced an underwritten public offering of $1.00 billion in aggregate principal amount of 5.875% notes due 2029. The notes will mature on March 1, 2029, and may be redeemed in whole or in part at Ares Capital’s option at any time at par plus a “make-whole” premium, if applicable.

BofA Securities, Inc., J.P. Morgan Securities LLC, SMBC Nikko Securities America, Inc., Wells Fargo Securities, LLC, Mizuho Securities USA LLC, MUFG Securities Americas Inc., RBC Capital Markets, LLC, Santander US Capital Markets LLC and Truist Securities, Inc. are acting as joint book-running managers for this offering. CIBC World Markets Corp., ICBC Standard Bank Plc, Morgan Stanley & Co. LLC, Barclays Capital Inc., BNP Paribas Securities Corp., BNY Mellon Capital Markets, LLC, Capital One Securities, Inc., Goldman Sachs & Co. LLC, Natixis Securities Americas LLC, Regions Securities LLC and SG Americas Securities, LLC are acting as joint lead managers for this offering. ING Financial Markets LLC, R. Seelaus & Co., LLC, Academy Securities, Inc., Citigroup Global Markets Inc., Comerica Securities, Inc., Deutsche Bank Securities Inc., Keefe, Bruyette & Woods, Inc., Loop Capital Markets LLC, Samuel A. Ramirez & Company, Inc. and Siebert Williams Shank & Co., LLC are acting as co-managers for this offering. The offering is expected to close on January 23, 2024, subject to customary closing conditions.

Ares Capital expects to use the net proceeds of this offering to repay certain outstanding indebtedness under its debt facilities. Ares Capital may reborrow under its debt facilities for general corporate purposes, which include investing in portfolio companies in accordance with its investment objective.

Investors are advised to carefully consider the investment objective, risks, charges and expenses of Ares Capital before investing. The pricing term sheet dated January 16, 2024, the preliminary prospectus supplement dated January 16, 2024, and the accompanying prospectus dated June 3, 2021, each of which have been filed with the Securities and Exchange Commission, contain this and other information about Ares Capital and should be read carefully before investing.

The information in the pricing term sheet, the preliminary prospectus supplement, the accompanying prospectus and this press release is not complete and may be changed. The pricing term sheet, the preliminary prospectus supplement, the accompanying prospectus and this press release are not offers to sell any securities of Ares Capital and are not soliciting an offer to buy such securities in any jurisdiction where such offer and sale is not permitted.

The offering may be made only by means of a preliminary prospectus supplement and an accompanying prospectus. Copies of the preliminary prospectus supplement (and accompanying prospectus) may be obtained from BofA Securities, Inc., NC1-022-02-25, 201 North Tryon Street, Charlotte NC 28255-0001, Attn: Prospectus Department, or by calling 1-800-294-1322, or email dg.prospectus_requests@bofa.com; J.P. Morgan Securities LLC, 383 Madison Avenue, New York NY 10179, Attn: Investment Grade Syndicate Desk, 1-212-834-4533; SMBC Nikko Securities America, Inc. at 277 Park Avenue, New York, New York 10172, Attn: Debt Capital Markets, 1-888-868-6856; or Wells Fargo Securities, LLC at 1-800-645-3751.

ABOUT ARES CAPITAL CORPORATION

Founded in 2004, Ares Capital is a leading specialty finance company focused on providing direct loans and other investments in private middle market companies in the United States. Ares Capital’s objective is to source and invest in high-quality borrowers that need capital to achieve their business goals, which often times can lead to economic growth and employment. Ares Capital believes its loans and other investments in these companies can help generate attractive levels of current income and potential capital appreciation for investors. Ares Capital, through its investment manager, utilizes its extensive, direct origination capabilities and incumbent borrower relationships to source and underwrite predominantly senior secured loans but also subordinated debt and equity investments. Ares Capital has elected to be regulated as a business development company (“BDC”) and was the largest publicly traded BDC by market capitalization as of December 31, 2023. Ares Capital is externally managed by a subsidiary of Ares Management Corporation (NYSE: ARES), a publicly traded, leading global alternative investment manager.

FORWARD-LOOKING STATEMENTS

Statements included herein may constitute “forward-looking statements,” which relate to future events or Ares Capital’s future performance or financial condition. These statements are not guarantees of future performance, condition or results and involve a number of risks and uncertainties. Actual results and conditions may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Ares Capital’s filings with the Securities and Exchange Commission. Ares Capital undertakes no duty to update any forward-looking statements made herein.

INVESTOR RELATIONS CONTACTS



Ares Capital Corporation

Carl Drake or John Stilmar

888-818-5298

irarcc@aresmgmt.com

Source: Ares Capital Corporation

FAQ

What is the principal amount of the notes offered by Ares Capital Corporation?

Ares Capital Corporation has offered $1.00 billion in aggregate principal amount of 5.875% notes due 2029.

When will the notes mature?

The notes will mature on March 1, 2029.

What is the purpose of the net proceeds from the offering?

Ares Capital Corporation expects to use the net proceeds to repay certain outstanding indebtedness under its debt facilities.

When is the offering expected to close?

The offering is expected to close on January 23, 2024, subject to customary closing conditions.

Who are the joint book-running managers for this offering?

BofA Securities, Inc., J.P. Morgan Securities LLC, SMBC Nikko Securities America, Inc., Wells Fargo Securities, LLC, Mizuho Securities USA LLC, MUFG Securities Americas Inc., RBC Capital Markets, LLC, Santander US Capital Markets LLC, and Truist Securities, Inc. are acting as joint book-running managers for this offering.

Ares Capital Corporation

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About ARCC

arcc provides one-stop solutions to meet the distinct and underserved financing needs of private middle-market companies across diverse industries.