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Ares Capital’s Purchase of Loans from SSLP

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Aug. 8 2017, Updated 12:10 p.m. ET

Purchase made

Ares Capital Corporation (ARCC) has made a big move by purchasing the remaining loans from SSLP, or Senior Secured Loan Fund, LLC. Ares Capital has purchased a loan portfolio valued at $1.6 billion, consisting of first lien senior secured loans. 

Coming to the internal rate of return (or IRR), Ares Capital generated an IRR of 20% since inception. The loan portfolio that the company has purchased from SSLP yields ~7.1%, which would improve the earnings of Ares Capital. According to Ares Capital’s management, this transaction could benefit Ares Capital shareholders in the long term.

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Acquisition of American Capital

Ares Capital’s top management seems to have a positive outlook on the acquisition of American Capital (ACAS), which the company completed in January 2017. In 2Q17, Ares Capital sold assets of American Capital valued at $210 million. 

With the sale of these assets of American Capital, Ares Capital generated ~$21 million of net realized gains. On June 30, 2017, the portfolio’s fair value was $2.1 billion.

Price estimates

Within one year, Ares Capital Corporation (ARCC) stock is expected to reach $18.21, reflecting a rise of ~11.0% from its current price. On the other hand, the one-year price target of other investment management companies (XLF) are as follows:

  • BlackRock Capital Investment (BKCC): $7.44
  • Prospect Capital (PSEC): $6.88
  • Apollo Investment (AINV): $6.25
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