Ares Capital Corporation Prices Public Offering of $1.00 Billion 5.875% Unsecured Notes Due 2029
- 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.
- The offering may lead to increased indebtedness for Ares Capital Corporation, which could impact its financial position and liquidity.
Insights
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.
BofA Securities, Inc., J.P. Morgan Securities LLC, SMBC Nikko Securities America, Inc., Wells Fargo Securities, LLC, Mizuho Securities
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,
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
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.
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INVESTOR RELATIONS CONTACTS
Ares Capital Corporation
Carl Drake or John Stilmar
888-818-5298
irarcc@aresmgmt.com
Source: Ares Capital Corporation
FAQ
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