Ares Capital (ARCC) has built a successful partnership with GE Capital’s US Sponsor Finance business over the last five and a half years. The company has built a partnership with GE Capital through a SSLP (senior secured loan program). It has built strong relationships with financial sponsors and companies in the SSLP.
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Ares Capital would continue to finance those sponsors and businesses either directly or with a new partner through the SSLP or through a new program. The company is confident that it will achieve a similar kind of program or proposal with other third parties. Ares Capital is also planning on starting a new funding program with GE Capital.
As of March 31, 2015, the weighted average remaining life of the loans in the SSLP is 4.3 years. GE Capital may not unilaterally sell the underlying loans in the SSLP. In respect to the SSLP, the sale must be approved by both of the companies. If no mutually acceptable replacement partner for GE Capital can be identified either by Ares Capital or through the GE Capital sale process, then the program would likely experience a gradual wind down as the underlying loans in the program are repaid.
GE Capital’s exit from the industry presents a seismic shift in the landscape of middle-market lending. The exit creates a significant opportunity for Ares Capital to grow its position in the market. It positions the company to be a more active originator and syndicator of first lien senior debt—this has been a core business at GE Capital—considering its low cost of capital advantage.
EPS (earnings per share) growth in the investment management space includes:
Together, these companies form 2.04% of the PowerShares Global Listed Private Equity Portfolio (PSP).