Business Context and Reporting Period
Ares Capital Corporation filed a Form 8-K Current Report on January 28, 2014, to disclose the creation of a direct financial obligation. The report details the issuance of additional senior notes to fund debt repayment and general corporate purposes.
Key Financial Metrics
- Debt Issuance: $150 million aggregate principal amount of 4.875% Senior Notes due 2018.
- Issuance Price: 102.7% of principal amount.
- Net Proceeds: Approximately $151.9 million after estimated offering expenses.
- Offering Expenses: Approximately $2.2 million (including a $1.5 million underwriting discount).
- Interest Rate: 4.875% per annum, payable semiannually.
- Maturity Date: November 30, 2018.
Material Changes
The Company increased its outstanding indebtedness by issuing $150 million in new notes. These "New 2018 Notes" are fungible with and rank equally to the $600 million of "Existing 2018 Notes" issued on November 19, 2013, creating a combined series of $750 million in 4.875% Senior Notes due 2018.
Outlook and Management Commentary
Management intends to use the net proceeds primarily to repay or repurchase certain outstanding indebtedness, including obligations under debt facilities. Any remaining proceeds will be used for general corporate purposes, including investing in portfolio companies in accordance with the Company's investment objective. The notes are direct unsecured obligations and may be redeemed at the Company's option at specified redemption prices.
Investor Verification Checklist
- Verify the total outstanding principal of the 2018 Notes series ($750 million) and its impact on leverage ratios.
- Confirm the specific debt facilities targeted for repayment with the $151.9 million in net proceeds.
- Review the Fourth Supplemental Indenture for specific redemption price schedules and call provisions.
- Assess the impact of the 4.875% interest rate on future interest expense relative to existing debt costs.