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How Ares Capital Corporation Performed in 3Q17

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Part 2
How Ares Capital Corporation Performed in 3Q17 PART 2 OF 6

What Led to Ares Capital’s Increased Total Operating Expenses in 3Q17?

Interest and credit facility fees

Ares Capital Corporation (ARCC) reported a rise in its total operating expenses from $116.0 million in 3Q16 to $146.0 million in 3Q17. This trend reflected a rise in the interest and credit facility fees and base management fees.

The company reported total interest and credit facility fees of $56.0 million in 3Q17 compared to $43.0 million in 3Q16, which reflects the rise in stated interest expenses.

What Led to Ares Capital’s Increased Total Operating Expenses in 3Q17?

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Ares Capital saw a rise in stated interest expense from $37.0 million in 3Q16 to $46.0 million in 3Q17, reflecting an increase in the outstanding average principal amount of debt. Ares Capital’s facility fees rose from $1.0 million in 3Q16 to $3.0 million in 3Q17.

On an LTM (last-12-months) basis, Ares Capital has delivered a return on assets of ~4.8%. Its peers (XLF) Hercules Capital (HTGC), Apollo Investment Corporation (AINV), and TPG Specialty Lending (TSLX) reported returns on assets of ~5.0%, ~3.1%, and ~7.2%, respectively, on an LTM basis.

Base management fees

Ares Capital (ARCC) reported an increase in its base management fees from $34.0 million in 3Q16 to $44.0 million in 3Q17, which reflects the rise in the average size of its portfolio. The company reported a rise in its income-based fees from $33.0 million in 3Q16 to $35.0 million in 3Q17. ARCC’s administrative fees have remained flat at $3.0 million in 3Q17 compared to 3Q16.

Ares Capital reported an increase in its professional fees and expenses from $3.0 million in 3Q16 to $4.0 million in 3Q17. These fees and expenses were incurred for the American Capital (ACAS) acquisition.

ARCC reported other general and administrative expenses of $7.0 million in 3Q17 compared to $6.0 million in 3Q16.

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