Ares to buy First Capital Holdings from H.I.G.

The asset-based lending portfolio will be combined with Ares’ existing commercial finance business for a $700 million loan platform.

Ares Management’s commercial finance fund, which is part of the alternative investment firm’s direct lending group, has inked an agreement to buy the asset-based lending portfolio of First Capital Holdings, another commercial finance company that provides asset-based loans and factoring to small and mid-market companies.

First Capital is a portfolio company of Miami, Florida-based private equity firm, H.I.G Capital. The transaction is expected to close during the second quarter. The Ares fund plans to finance the acquisition with a combination of debt and equity, Ares said in a statement on 17 April.

With this transaction, the Ares commercial finance platform will have about $700 million of loan commitments. The Ares commercial finance team will also expand with members of the First Capital investment group.

“We have a long held view that commercial finance is an important and growing sector that requires a broad and strong direct lending platform like ours in order to originate, underwrite and service loans,” Mitch Goldstein, senior partner in the Ares Direct Lending Group, said in a statement.

“Investors continue to benefit from Ares’ ability to provide a broad array of credit strategies, especially in sectors where banks are increasingly either unable or unwilling to provide sufficient capital to companies or sponsors to meet the demand,” commented Michael Arougheti, president of Ares Management. “We expect to continue to expand our commercial finance platform in order to meet the evolving needs of our investors for attractive and differentiated investment alternatives.”

The Ares commercial finance platform provides asset-based and cash flow loans to small and mid-market companies, as well as asset-based facilities to specialty finance companies. Asset-based lines of credit may be structured as working capital financing, special accommodation financing, turnaround financing, debtor-in-possession financing, acquisition financing and specialty lender financing. Target credit facilities range in size from $1 million to $30 million, are typically held to maturity and are not dependent on syndication for approval.

Ares launched its commercial finance business earlier this year, having acquired a group from Keltic Financial for the effort in June last year. The firm was already in the process of raising money and making deals with the new vehicle, although a fund target hadn’t been revealed.

First Capital provides working capital financing to small and mid-market companies engaged in manufacturing, distributing and business services with annual sales greater than $1 million. Its lines of credit are in the form of asset-based loans, factoring or invoice purchasing arrangements ranging from $200,000 to $25 million. The company is headquartered in New York, with additional offices in Atlanta, Boynton Beach, Chicago, Dallas, Los Angeles and Oklahoma City.

Ares is an alternative asset manager with $86 billion of assets under management and 15 offices in the US, Europe and Asia. The firm is headquartered in Los Angeles, with most of its US direct lending group based in New York. Ares operates through four lines of business:  tradable credit, direct lending, private equity and real estate.