Understanding Ares Capital’s Commitments and Exits in 3Q17
Commitments in 3Q17
Ares Capital Corporation (ARCC) reported a marginal rise in its gross commitments in 3Q17 compared to 3Q16. ARCC reported gross commitments of $1.54 billion in 3Q17 compared to $1.52 billion in 3Q16.
The new commitments made in 3Q17 were in the following proportions:
- first lien senior secured loans: 51.0%
- senior subordinated loans: 9.0%
- second lien senior secured loans: 36.0%
- other equity securities: 1.0%
- subordinated certificates of SDLP (Senior Direct Lending Program, LLC): 3.0%
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Of the gross commitments in 3Q17, Ares Capital invested $678.0 million in new portfolio companies while it invested $868.0 million in existing portfolio companies.
Ares Capital reported return on equity on an LTM (last-12-months) basis of ~8.3%. The company’s peers (XLF) TPG Specialty Lending (TSLX), Hercules Capital (HTGC), and Apollo Investment Corporation (AINV) posted returns on equity on an LTM basis of ~12.3%, 9.4%, and 5.3%, respectively.
Exits in 3Q17
In order to calculate net investment commitments, Ares Capital (ARCC) deducts investment commitments exited from the new investment commitments. In 3Q17, the company has made exits of ~$1.6 billion of investment commitments.
This number also includes the exits totaling $418.0 million, which is related to the acquisition of American Capital (ACAS). The company has made exits in the following proportions:
- first lien senior secured loans: 33.0%
- second lien senior secured loans: 18.0%
- subordinated certificates of SSLP (Senior Secured Loan Fund LLC): 29.0%
- senior subordinated debt: 5.0%
- other equity securities: 10.0%
- collateralized loan obligations: 2.0%
- preferred equity securities: 3.0%