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Ares Capital Corp. Reports Operating Results (10-K)

March 01, 2011 | About:

Ares Capital Corp. (NASDAQ:ARCC) filed Annual Report for the period ended 2010-12-31.

Ares Capital Corp. has a market cap of $3.43 billion; its shares were traded at around $17.83 with a P/E ratio of 13.9 and P/S ratio of 14. The dividend yield of Ares Capital Corp. stocks is 7.9%. Ares Capital Corp. had an annual average earning growth of 11.4% over the past 5 years.Hedge Fund Gurus that owns ARCC: John Griffin of Blue Ridge Capital, Paul Tudor Jones of The Tudor Group, Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

The aggregate market value of the voting stock held by non-affiliates of the registrant on June 30, 2010, based on the closing price on that date of $12.53 on The NASDAQ Global Select Market, was approximately $2,407,856,738. As of February 25, 2011, there were 204,418,725 shares of the registrant's common stock outstanding.

Ares Capital's investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in U.S. middle-market companies, where we believe the supply of primary capital is limited and the investment opportunities are most attractive. However, we may from time to time invest in larger companies. We generally use the term "middle-market" to refer to companies with annual EBITDA between $10 million and $250 million. As used herein, EBITDA represents net income before net interest expense, income tax expense, depreciation and amortization.

committed capital under management, approximately $2.5 billion in aggregate principal amount of which was funded as of December 31, 2010. At December 31, 2010, our total commitment to the SSLP was approximately $1 billion, of which approximately $400 million was unfunded. The SSLP is capitalized as transactions are completed and both investment and portfolio management decisions must be approved by both the Company and GE.

In addition, we have made investments in our portfolio company, IHAM, which manages ten unconsolidated senior debt funds, which are described in more detail under "Managed Funds Portfolio" below. We have also made direct investments in securities of certain of these vehicles. As of December 31, 2010, IHAM had total committed capital under management of approximately $3.7 billion, which includes approximately $360 million invested by Ares Capital in IHAM or funds managed by IHAM.

Global Private Debt Group. The Ares Global Private Debt Group manages the assets of Ares Capital, Ares Credit Strategies Fund II, L.P., Ares Credit Strategies Fund III, L.P. and Ares' private debt middle-market financing business in Europe, Ares Capital Europe ("ACE"), which together had approximately $15 billion of total committed capital under management as of December 31, 2010. Included within the $15 billion of total committed capital under management is capital committed by third parties totaling $4.1 billion attributable to the SSLP and $3.3 billion attributable funds managed by IHAM. The Global Private Debt Group focuses primarily on non-syndicated first and second lien senior loans and mezzanine debt, which in some cases may include an equity component. The Global Private Debt Group also makes equity investments in private middle-market companies, usually in conjunction with a concurrent debt investment. Capital Markets Group. The Ares Capital Markets Group managed approximately $18 billion of total committed capital under management as of December 31, 2010 through a variety of funds and investment vehicles, focusing primarily on syndicated senior secured loans, high yield bonds, distressed debt, other liquid fixed income investments and other publicly traded debt securities. Private Equity Group. The Ares Private Equity Group managed approximately $6 billion of total committed capital under management as of December 31, 2010, primarily through Ares Corporate Opportunities Fund L.P., Ares Corporate Opportunities Fund II, L.P. and Ares Corporate Opportunities Fund III, L.P. (collectively referred to as "ACOF"). ACOF generally makes private equity investments in amounts substantially larger than the private equity investments anticipated to be made by Ares Capital. In particular, the Private Equity Group 3

We have built an investment portfolio of primarily first and second lien loans, mezzanine debt and, to a lesser extent, equity investments in private middle-market companies. Our portfolio is well diversified by industry sector and its concentration to any single issuer is limited. Our investments have generally ranged between $20 million to $200 million each, although the investment size may be more or less than this range depending on capital availability. To a lesser extent, we also make preferred and/or common equity investments, which have generally been non-control equity investments of less than $20 million (usually in conjunction with a concurrent debt investment). However, we may increase the size or change the nature of these investments. Also, as a result of the Allied Acquisition, Allied Capital's equity investments, which included equity investments larger than those we have historically made and controlled portfolio company equity investments, became part of our portfolio. We intend to actively seek opportunities over time to dispose of certain of the assets that were acquired in the Allied Acquisition, particularly non-yielding equity investments, as well as lower or non-yielding debt investments and investments that may not be core to our investment strategy, and generally rotate them into higher-yielding first and second lien senior loans and mezzanine debt investments. However, there can be no assurance that this strategy will be successful. See "Management's Discussion and Analysis of Financial Condition and Results of Operations- Portfolio and Investment Activity" for further information on the rotation of investments acquired as part of the Allied Acquisition.

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