Business Context and Reporting Period
This Form 8-K Current Report was filed by Ares Capital Corporation on March 28, 2011. The filing details a material definitive agreement involving the issuance of convertible senior notes and the planned redemption of existing notes.
Key Financial Metrics
- New Debt Issuance: $230 million aggregate principal amount of 5.125% Convertible Senior Notes due 2016.
- Net Proceeds: Approximately $223.6 million.
- Offering Expenses: Approximately $6.4 million (including a $5.8 million discount to initial purchasers).
- Total Consolidated Indebtedness: $1,534.8 million principal amount as of March 28, 2011.
- Revolving Facilities: No outstanding borrowings as of March 28, 2011.
- Planned Redemption: $161.2 million aggregate principal amount of 6.00% Notes due 2012.
Material Changes
The company utilized the net proceeds from the new convertible note issuance to pay down indebtedness under its wholly owned subsidiary's revolving funding facility. Consequently, there were no outstanding borrowings under revolving facilities immediately following the transaction. Additionally, the company announced plans to redeem the remaining $161.2 million of its 2012 Notes, which were assumed during the acquisition of Allied Capital Corporation in April 2010.
Outlook, Risks, and Unusual Items
- Convertible Note Terms: The new notes mature on June 1, 2016. They bear interest at 5.125% payable semiannually. Holders may convert notes into cash, common stock, or a combination thereof at an initial conversion rate of 52.5348 shares per $1,000 principal amount (approx. $19.04 per share).
- Redemption Restrictions: Ares Capital may not redeem the Convertible Notes prior to maturity. No sinking fund is provided.
- Repurchase Rights: Holders may require the company to repurchase the notes at 100% of principal plus accrued interest if certain corporate events occur.
- Redemption Timeline: The redemption of the 2012 Notes is expected to be completed on April 27, 2011.
- Regulatory Status: The securities were sold under exemptions from registration (Section 4(2) and Rule 144A) and are not registered under the Securities Act.
Investor Verification Checklist
- Verify the final closing date and completion of the $161.2 million redemption of the 2012 Notes scheduled for April 27, 2011.
- Confirm the actual conversion rate and any potential adjustments to the initial $19.04 conversion price.
- Review the full text of the Indenture (Exhibit 4.1) for specific covenants and limitations regarding the Convertible Notes.
- Monitor future filings for any changes in the company's status under the Investment Company Act of 1940, which triggers specific reporting covenants.