The Ares Capital Corporation and American Capital, two of the largest publicly traded BDCs by total assets, both announced share repurchase programmes this week. These BDCs and others have struggled with share prices trading below book value and are launching the repurchase programmes to address the issue.
Ares Capital (ARCC) said on Monday (28 September) that its board of directors has approved a stock repurchase programme of up to $100 million. Ares Capital expects that the policy will be in effect until 30 September next year, or until it reaches the $100 million upper limit. The programme does not require Ares Capital to repurchase a specific number of shares and can be suspended, extended, modified or discontinued at any time, said a statement from the firm.
The BDC made the announcement two days ahead of its investor day this Wednesday. Ares Capital was trading at 0.89x price to net asset value (NAV) as of 25 September. The BDC has about $9.1 billion in assets.
American Capital (ACAS), meanwhile, has already executed some share repurchases. In the third quarter, the BDC bought back about 9.7 million common shares, or 3.6 percent of the company's outstanding shares as of 30 June, the firm announced on 29 September. The shares were purchased at an average price of $13.82 per share, totaling approximately $134.6 million.
Since the inception of its stock buyback programme in 2011, American Capital has made open market purchases of 117.8 million shares, or 34.1 percent of the company's outstanding shares as of 30 June 2011, at an average price of $12.05 per share, totalling $1.4 billion. ACAS had about $8.08 billion in assets as of 30 June. Its price to NAV stood at 0.63x as of last week.
Other firms that have been trading below book value for some time, like Fifth Street’s BDCs and the Medley Capital Corporation, have also recently announced stock repurchase programmes. The management of TPG Specialty Lending (TSLX) and Goldman Sachs BDC (GSBD) which are still trading at slight premiums to NAV have said they would buyback shares should their stocks fall below book value.