Ares Capital Corporation - Form 8-K Summary
Business Context and Reporting Period
This Form 8-K was filed by Ares Capital Corporation on July 21, 2009. The report details the entry into material definitive agreements to establish a new securitized credit facility and satisfy conditions for an existing term facility.
Key Financial Metrics and Agreements
- New Credit Facility: Established the "CP Funding II Facility," a revolving credit facility with an aggregate principal amount not exceeding $200,000,000.
- Interest Rate: 400 basis points over LIBOR.
- Maturity: July 21, 2012, with two one-year extension options subject to mutual consent.
- Servicing Fee: The Company will service the assets for a fee of 50 basis points per annum on the aggregate outstanding principal balance.
- Existing Facility: The execution of this agreement satisfies a condition for a previously disclosed $225,000,000 CP term facility maturing in May 2012.
- Guarantees: Ares Capital CP Funding LLC guarantees the new facility; Ares Capital CP Funding II LLC guarantees the existing $225 million facility.
Material Changes
The primary material change is the creation of a new $200 million revolving facility secured by loans originated or acquired by the Company. This structure involves a two-tier purchase and sale agreement where loans are sold from the Company to a wholly-owned subsidiary (CP Holdings) and then to another subsidiary (Ares Capital CP II), which borrows against them. This filing also confirms the definitive documentation condition for the $225 million term facility has been met.
Outlook, Risks, and Contingencies
- Leverage Restrictions: Borrowings are subject to leverage restrictions under the Investment Company Act of 1940.
- Events of Default: The Note Purchase Agreement includes standard events of default, including termination of the CP Funding Facility. Upon default, the lender (Wachovia) may foreclose on the Loans and pursue rights directly with obligors.
- Covenants: The Company and its subsidiaries must comply with various covenants, servicing procedures, and limitations on the disposition of Loans.
Investor Verification Checklist
- Verify the full text of the Note Purchase Agreement (Exhibit 10.1) and Purchase and Sale Agreements (Exhibits 10.2 and 10.3) for specific covenants and default triggers.
- Confirm the status of the $225 million CP term facility and its maturity date of May 2012.
- Monitor the Company's compliance with Investment Company Act of 1940 leverage restrictions.
- Review the Company's ability to originate or acquire sufficient loans to utilize the new $200 million facility.