Ares Capital (ARCC)
$150m (+22.5m) sen unsec cb coming tonight from WFC, MER, JPM, MS. Terms: 5yr, 4.375-4.875% up 17.5-20%, full pctns (div > 0.37). UOP = gcp, debt repayment. $575 deal came 5.75 up 17.5% (01/11), $230m cb came 5.75 up 17.5% (01/11) $230m cb came 5.125 up 17.5% (03/11), both priced off $16.28 (stk now $16.57). 5.75% back out L+525 & 5.125% L+575 (23 vol). We’ll use 23 vol (where the 2 existing imply). Theo = 99.5. There is not much to do here, no switch (no puck up on delta, why swap slightly cheaper 4 yr into 5 yr), no index inclusion (due to issue size). Again, we all want to see more paper but not sure what the trade is here. Small enough to get done but we prefer the existing. Serial issuer, no switch trade – AVOID.
Business development company focused on debt and equity investments in private middle market US companies
PF Cash $267mm
PF Debt $2074mm
LTM EBITDA $473mm
LTM FCF -397mm
Leverage 4.4x
Mkt Cap $3,671mm
ARCC has good track record & held up well during downturn. Portfolio skewed toward more senior issues & well diversified by ind sector (less cyclical) & geography. Increased liquidity w/Jan equity & notes offering used to pay down rev. Most of $810mm secured revolver available & some avail on funding facility. <25% of debt secured, leaving significant unencumbered assets for added flexibility.
Our assigned spread L+550