Ares BDC to pay off loans with note proceeds

The notes will mature in January 2022, but Ares can redeem the securities early under certain conditions.

Ares Capital Corporation has refinanced a portion of its existing $3.9 billion debt with the issuance of $600 million in unsecured notes, according to US regulatory filings with the Securities and Exchange Commission.

The business development company on Monday issued the notes, which are priced at 3.625 percent. Ares estimates net proceeds from the sale will be $591.8 million after taking into account, among other things, the underwriting discount and offering expenses. A source familiar with the situation said Ares will use the proceeds to pay down existing secured facilities.

The notes will mature on 19 January 2022, though Ares can redeem them at an earlier date with a possible make-whole premium that will reimburse creditors for any lost interest payments due to the early payoff. Fitch Ratings said it expected to rate the notes BBB.

The note issuance comes shortly after Ares and Varagon Capital Partners officially formalised their direct lending partnership, which was announced in June of last year. The programme now has $926 million in first lien senior secured loans. The company is also still waiting for its $3.4 billion acquisition of American Capital to close, which will create a $13 billion BDC, as Ares shareholders will vote on it once the SEC signs off on the proxy circulated in July.

Ares Capital Corporation is a BDC advised by Ares Capital Management, and recently topped PDI’s list of largest publicly traded BDCs, listing assets of $9.3 billion.