Ares Capital Corporation (NASDAQ:ARCC), a leading specialty finance company with a market capitalization of $14.27 billion and an attractive 8.7% dividend yield, has entered into a definitive agreement for the issuance and sale of $1,000,000,000 in senior notes, the company disclosed in a Form 8-K filed with the Securities and Exchange Commission today. According to InvestingPro, the company maintains a FAIR financial health score, with solid revenue growth of 15.35% over the last twelve months.
The notes, bearing an interest rate of 5.800%, are set to mature on March 8, 2032, with the company retaining the option to redeem them, in whole or in part, prior to maturity. Interest on the notes will be paid semiannually starting September 8, 2025.
Proceeds from the issuance are intended to repay existing debt under Ares Capital's credit facilities. This action could potentially allow for reborrowing under the same facilities for general corporate purposes, which may include further investments in line with the company's strategic objectives.
The notes, unsecured and ranking pari passu with all other unsecured and unsubordinated indebtedness, are subject to customary covenants. These include adherence to certain asset coverage requirements as per the Investment Company Act of 1940, and a commitment to provide financial information in the event the company is no longer subject to SEC reporting requirements.
A change of control repurchase event clause is included, requiring Ares Capital to offer to repurchase the notes at par plus accrued interest, should a change of control be accompanied by a downgrade of the notes below investment grade.
The offering was made under a previously filed registration statement and facilitated by a Purchase Agreement dated January 2, 2025. The transaction's closing occurred today. In connection with the notes issuance, Ares Capital has also entered into a forward-starting interest rate swap to convert fixed rate interest to a floating rate, effective January 8, 2026, through the maturity of the notes.
This financial move by Ares Capital Corporation, based on the press release statement, is part of the company's broader strategy to manage its debt profile and finance its operations effectively. With a current ratio of 1.49 and trading at a P/E ratio of 8.44, the company shows promising financial metrics. For deeper insights into ARCC's valuation and growth potential, InvestingPro offers comprehensive analysis through its detailed Pro Research Report, available for over 1,400 US stocks.
In other recent news, Ares Capital Corporation has been making significant strides in its financial performance. The company reported strong core earnings of $0.58 per share and a record net asset value of $19.77 per share in the third quarter of 2024. Furthermore, Ares Capital's portfolio expanded to $25.9 billion, reflecting a significant increase in transaction reviews year-over-year, reaching nearly $155 billion in deal volume.
In addition to these financial results, Ares Capital has recently completed a $544 million debt securitization transaction, further strengthening its financial structure. The company has also adjusted the terms of its financing arrangement with Sumitomo Mitsui (NYSE:SMFG) Banking Corporation, extending the reinvestment period and the maturity date of the facility, and reducing the interest rate charged, a move expected to influence the company's borrowing costs and investment strategies.
In the realm of analyst upgrades, Wells Fargo (NYSE:WFC) has upgraded Ares Capital stock, acknowledging its consistent credit performance and potential for leveraging its balance sheet in favorable market conditions. Moody's (NYSE:MCO) has also upgraded the company's credit rating to Baa2, which is expected to enhance its competitive positioning in the market.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.