Business Context and Reporting Period
This Form 8-K, dated April 1, 2010, reports the completion of the merger between Ares Capital Corporation ("Ares Capital") and Allied Capital Corporation ("Allied Capital"). Ares Capital is the surviving entity. The filing details the assumption of Allied Capital's debt obligations and the issuance of new equity to Allied Capital shareholders.
Key Financial Metrics and Debt Obligations
Upon consummation of the merger, Ares Capital assumed approximately $745.5 million in aggregate principal amount of unsecured notes previously issued by Allied Capital. The specific debt instruments assumed are:
- 6.625% Notes due 2011: $319.9 million aggregate principal.
- 6.000% Notes due 2012: $195.6 million aggregate principal.
- 6.875% Notes due 2047: $230.0 million aggregate principal.
Additionally, Allied Capital's $250.0 million senior secured term loan was repaid upon the merger's completion. The filing does not provide specific revenue, profit, or cash flow figures for the combined entity in the text; these are referenced in attached exhibits.
Material Changes
The primary material change is the acquisition of Allied Capital. To effect the transaction, Allied Capital stockholders received 0.325 shares of Ares Capital common stock for each share of Allied Capital common stock held, resulting in the issuance of approximately 58.5 million new shares of Ares Capital common stock. Ares Capital also entered into a Fourth Supplemental Indenture to assume the rights and obligations of Allied Capital under the existing Base Indenture.
Guidance, Risks, and Covenants
Ares Capital is subject to financial and operating covenants associated with the assumed unsecured notes. Specifically, the company must maintain an asset coverage of all outstanding indebtedness of at least 200% immediately after any new issuance of indebtedness, as required by the Investment Company Act of 1940. The filing incorporates by reference unaudited pro forma condensed consolidated financial information reflecting the merger as of December 31, 2009, but does not contain forward-looking guidance or management commentary in the text provided.
Investor Verification Checklist
- Verify the terms of the Fourth Supplemental Indenture (Exhibit 10.1) regarding redemption premiums and tax events.
- Review the unaudited pro forma condensed consolidated financial information (Exhibit 99.2) to assess the combined entity's financial position.
- Confirm the exact number of fractional shares paid in cash to Allied Capital shareholders.
- Examine the audited consolidated financial statements of Allied Capital (Exhibit 99.1) for historical performance data.