Business Context and Reporting Period
Ares Capital Corporation filed a Form 8-K on May 2, 2013, reporting the entry into a material definitive agreement. The filing details the amendment and restatement of the company's senior secured revolving credit facility.
Key Financial Metrics and Facility Terms
- Facility Size: Increased from $900 million to $930 million.
- Maximum Capacity: An "accordion" feature allows expansion up to $1.4 billion under certain circumstances.
- Revolving Period: Extended from May 4, 2015, to May 4, 2017.
- Maturity Date: Extended from May 4, 2016, to May 4, 2018.
- Pricing (LIBOR): Reduced spread from 2.25% to 2.00%.
- Pricing (Alternate Base Rate): Reduced spread from 1.25% to 1.00%.
- Collateral: Secured by a material portion of assets, excluding specific subsidiary investments.
Material Changes Versus Prior Period
The primary material change is the restructuring of the credit facility to increase liquidity capacity and extend the timeline for borrowings. Specifically, the facility size grew by $30 million, and the maturity was pushed back by two years. Additionally, the cost of borrowing was reduced through lower applicable spreads on both LIBOR and alternate base rate options.
Covenants, Risks, and Management Commentary
The amended facility includes standard covenants and restrictions, including:
- Limitations on additional indebtedness, liens, investments, asset transfers, and restricted payments.
- Requirement to maintain a minimum stockholders' equity.
- Mandatory asset coverage ratio of total assets (less total liabilities) to total indebtedness of not less than 2.0:1.0.
- Compliance with a borrowing base applying different advance rates to portfolio assets.
- Adherence to leverage restrictions under the Investment Company Act of 1940.
The filing does not provide specific revenue, profit, or cash flow figures for the reporting period, as the document focuses solely on the credit agreement amendment.
Investor Verification Checklist
- Verify the full text of the Third Amended and Restated Senior Secured Revolving Credit Agreement (Exhibit 10.1) for specific conditions on the accordion feature.
- Confirm the company's current compliance with the 2.0:1.0 asset coverage ratio covenant.
- Review the specific advance rates applied to different asset types under the borrowing base.
- Check for any subsequent filings regarding the utilization of the increased $930 million facility.