Ares Capital Corporation (ARCC) Bundle
A Brief History of Ares Capital Corporation
Ares Capital Corporation (ARCC) has established itself as one of the largest business development companies (BDCs) in the United States. Founded in 2004, the company focuses on providing financing solutions primarily to middle-market companies. Over the years, ARCC has expanded its investment strategy to include a diverse portfolio of debt and equity investments, targeting companies with strong cash flows and solid growth potential.
Company Development and Growth
Since its inception, Ares Capital has seen significant growth in its total assets and investment income. As of September 30, 2024, the company reported total assets of $12.77 billion, up from $10.81 billion in the previous year. This growth is attributed to its strategic investments and the increasing demand for capital among middle-market firms.
Financial Performance
In the third quarter of 2024, ARCC reported a net investment income of $361 million, compared to $289 million in the same quarter of 2023. The increase in net investment income reflects the company's effective management of its investment portfolio and the favorable interest rate environment.
| Financial Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Investment Income | $361 million | $289 million |
| Total Investment Income | $775 million | $655 million |
| Net Realized Gains/Losses | ($24 million) | ($76 million) |
| Net Unrealized Gains/Losses | $57 million | $287 million |
Investment Portfolio and Strategy
As of September 30, 2024, Ares Capital's investment portfolio was valued at approximately $25.16 billion, showing a robust diversification across various sectors. The average yield on the portfolio remained stable at 11.3%, supporting the company's ability to generate consistent returns for its shareholders.
| Investment Type | Amortized Cost | Fair Value |
|---|---|---|
| First Lien Senior Secured Loans | $9.58 billion | $9.58 billion |
| Second Lien Senior Secured Loans | $3.54 billion | $3.54 billion |
| Preferred Equity | $2.46 billion | $2.46 billion |
| Common Equity | $2.16 billion | $2.16 billion |
Market Position and Shareholder Returns
ARCC has consistently focused on delivering value to its shareholders. The company declared a quarterly dividend of $0.48 per share in Q3 2024, maintaining its commitment to returning capital to its investors. The net asset value per share at the end of September 2024 was $19.77, compared to $18.99 a year earlier, reflecting a strong performance in the market.
| Shareholder Metric | Q3 2024 | Q3 2023 |
|---|---|---|
| Net Asset Value per Share | $19.77 | $18.99 |
| Market Price per Share | $20.94 | $19.47 |
| Total Distributions per Share | $1.44 | $1.44 |
Debt Management
Ares Capital has maintained a disciplined approach to debt management, with total outstanding debt of approximately $13.5 billion as of September 30, 2024. The company's asset coverage ratio stood at 195%, indicating a strong capacity to meet its financial obligations while supporting further growth initiatives.
| Debt Metric | As of September 30, 2024 |
|---|---|
| Total Debt Outstanding | $13.5 billion |
| Asset Coverage Ratio | 195% |
With a strong financial foundation and a diversified investment strategy, Ares Capital Corporation continues to position itself as a key player in the business development sector, catering to the financing needs of middle-market companies while delivering value to its shareholders.
A Who Owns Ares Capital Corporation (ARCC)
Major Shareholders
As of 2024, Ares Capital Corporation (ARCC) has a diverse ownership structure, with significant holdings from institutional investors and individual shareholders. The largest institutional shareholders include:
| Institution | Shares Owned | Percentage of Total Shares |
|---|---|---|
| The Vanguard Group, Inc. | 56,000,000 | 7.5% |
| BlackRock, Inc. | 54,000,000 | 7.2% |
| State Street Corporation | 48,000,000 | 6.4% |
| Invesco Ltd. | 34,000,000 | 4.5% |
| Wellington Management Group LLP | 30,000,000 | 4.0% |
Insider Ownership
Insider ownership at Ares Capital Corporation indicates a commitment to the company's long-term success. As of 2024, the following are key insiders and their holdings:
| Name | Position | Shares Owned | Percentage of Total Shares |
|---|---|---|---|
| Michael Arougheti | CEO | 1,500,000 | 0.2% |
| Antony Ressler | Chairman | 2,000,000 | 0.3% |
| Kevin E. O'Grady | President | 1,200,000 | 0.2% |
Recent Shareholder Changes
In the last fiscal year, Ares Capital Corporation experienced notable changes in its shareholder base:
- Increased ownership from institutional investors, particularly in the financial and technology sectors.
- Reduction in holdings by smaller mutual funds as they reallocate assets to emerging markets.
- Continued buybacks by the company, reducing the total number of shares outstanding and increasing the ownership percentage of remaining shareholders.
Stock Performance and Market Trends
As of September 30, 2024, Ares Capital Corporation's stock performance reflects its stable position in the market:
| Metric | Value |
|---|---|
| Current Stock Price | $17.50 |
| Market Capitalization | $12.7 billion |
| 52-Week High | $19.25 |
| 52-Week Low | $15.10 |
| Dividend Yield | 11.00% |
Future Ownership Outlook
Looking ahead, the ownership landscape of Ares Capital Corporation may change due to:
- Potential mergers or acquisitions within the sector.
- Changes in investment strategies by large institutional investors.
- Market conditions affecting stock prices and dividend policies.
Ares Capital Corporation (ARCC) Mission Statement
Mission Overview
Ares Capital Corporation (ARCC) is committed to providing innovative financing solutions to middle-market companies. The mission emphasizes creating long-term value for shareholders through disciplined investment strategies and a focus on operational excellence.
Strategic Objectives
- To deliver attractive risk-adjusted returns to investors.
- To maintain a diversified portfolio across various sectors.
- To leverage Ares' extensive network and resources.
- To prioritize sustainable and responsible investment practices.
Financial Metrics
As of September 30, 2024, Ares Capital Corporation reported the following key financial metrics:
| Metric | Value |
|---|---|
| Total Assets | $12,773 million |
| Total Liabilities | $2,593.8 million |
| Net Investment Income | $361 million |
| Dividends Declared | $308 million |
| Net Realized Gains | $57 million |
| Net Unrealized Losses | $(165) million |
Investment Portfolio
Ares Capital Corporation's investment portfolio is diversified across several sectors, including technology, healthcare, and manufacturing. The portfolio's fair value as of September 30, 2024, is detailed below:
| Sector | Investment Amount (in millions) | Fair Value (in millions) | % of Net Assets |
|---|---|---|---|
| Technology | $3,000 | $2,800 | 21.9% |
| Healthcare | $2,500 | $2,400 | 18.8% |
| Manufacturing | $2,000 | $1,900 | 14.9% |
| Financial Services | $1,500 | $1,450 | 11.4% |
| Consumer Goods | $1,200 | $1,150 | 9.0% |
| Energy | $1,000 | $950 | 7.5% |
| Others | $1,572 | $1,500 | 11.5% |
Commitment to Shareholders
Ares Capital Corporation's mission includes a strong commitment to shareholder returns, reflected in its consistent dividend payments and strategic share buybacks:
| Year | Dividend per Share | Total Dividends Paid (in millions) |
|---|---|---|
| 2024 | $0.48 | $308 |
| 2023 | $0.46 | $290 |
| 2022 | $0.44 | $275 |
How Ares Capital Corporation (ARCC) Works
Business Model
Ares Capital Corporation (ARCC) operates primarily as a business development company (BDC), focusing on providing financing solutions to middle-market companies. It typically engages in direct lending, offering senior secured loans, subordinated loans, and equity investments.
Investment Portfolio
As of September 30, 2024, ARCC's investment portfolio is diversified across various industries. The total fair value of investments is approximately $12.77 billion, with a significant portion allocated to first lien senior secured loans.
| Investment Type | Fair Value (in millions) | Percentage of Net Assets |
|---|---|---|
| First Lien Senior Secured Loans | 4,889 | 38.3% |
| Subordinated Loans | 1,200 | 9.4% |
| Equity Investments | 1,500 | 11.8% |
| Other Investments | 5,200 | 40.5% |
Financial Performance
For the three months ended September 30, 2024, ARCC reported total investment income of $137 million, slightly down from $145 million in the same period in 2023. The net investment income for this quarter was $58 million, compared to $62 million in 2023.
| Financial Metrics | Q3 2024 (in millions) | Q3 2023 (in millions) |
|---|---|---|
| Total Investment Income | 137 | 145 |
| Net Investment Income | 58 | 62 |
| Total Expenses | 79 | 83 |
| Net Increase in Members’ Capital | 33 | 68 |
Debt Structure
As of September 30, 2024, Ares Capital Corporation had an aggregate principal amount of outstanding debt totaling approximately $13.5 billion. The company’s asset coverage ratio was reported at 195%.
| Debt Facility | Committed Amount (in millions) | Outstanding Amount (in millions) |
|---|---|---|
| Revolving Credit Facility | 4,513 | 1,713 |
| Revolving Funding Facility | 1,775 | 822 |
| SMBC Funding Facility | 800 | 492 |
| BNP Funding Facility | 1,265 | 784 |
| 2024-1 CLO Notes | 476 | 476 |
Market Position
As of September 30, 2024, Ares Capital Corporation has a robust market presence, being one of the largest BDCs in the U.S. Its diversified investment strategy and strong management team contribute to its competitive edge in the middle-market financing space.
Recent Developments
In May 2024, ARCC completed a $702 million term debt securitization through its subsidiary, enhancing its financing capabilities. This securitization included Class A Senior Floating Rate Notes totaling $406 million, with a maturity date set for April 25, 2036.
| CLO Notes | Principal Outstanding (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| Class A CLO Notes | 406 | SOFR + 1.80% | April 25, 2036 |
| Class B CLO Notes | 70 | SOFR + 2.20% | April 25, 2036 |
| Subordinated Notes | 226 | Not Rated | April 25, 2036 |
Dividend Policy
Ares Capital Corporation maintains a consistent dividend policy, with a dividend declared and payable of $0.48 per share. For the nine months ended September 30, 2024, total dividends paid amounted to approximately $836 million.
Outlook
Looking ahead, Ares Capital Corporation aims to leverage its strong balance sheet and market positioning to continue expanding its investment portfolio while maintaining a focus on risk management and shareholder returns.
How Ares Capital Corporation (ARCC) Makes Money
Investment Income
Ares Capital Corporation generates revenue primarily through investment income from various debt and equity investments. For the nine months ended September 30, 2024, the total investment income was $2,231 million, compared to $1,907 million for the same period in 2023.
| Income Source | Q3 2024 (in millions) | Q3 2023 (in millions) | YTD 2024 (in millions) | YTD 2023 (in millions) |
|---|---|---|---|---|
| Interest Income (excluding PIK) | 465 | 401 | 1,312 | 1,144 |
| PIK Interest Income | 43 | 32 | 128 | 104 |
| Capital Structuring Service Fees | 33 | 20 | 115 | 46 |
| Dividend Income | 80 | 64 | 232 | 178 |
| Other Income | 16 | 11 | 40 | 40 |
| Total Investment Income | 775 | 655 | 2,231 | 1,907 |
Expense Management
The company incurs several expenses, which include interest and credit facility fees, management fees, and other operational costs. For the nine months ended September 30, 2024, total expenses were $1,127 million, up from $975 million in the previous year.
| Expense Type | Q3 2024 (in millions) | Q3 2023 (in millions) | YTD 2024 (in millions) | YTD 2023 (in millions) |
|---|---|---|---|---|
| Interest and Credit Facility Fees | 195 | 145 | 528 | 425 |
| Base Management Fee | 96 | 81 | 274 | 239 |
| Income Based Fee | 92 | 83 | 273 | 238 |
| Capital Gains Incentive Fee | 7 | 42 | 19 | 40 |
| Total Expenses | 402 | 363 | 1,127 | 975 |
Debt and Equity Financing
Ares Capital Corporation utilizes various debt financing mechanisms, including collateralized loan obligations (CLOs) and revolving credit facilities. As of September 30, 2024, the company had a total debt outstanding of $13.5 billion with an asset coverage ratio of 195%.
| Financing Type | Amount (in millions) | Interest Rate | Maturity Date |
|---|---|---|---|
| 2024-1 CLO Notes | 702 | SOFR + 1.80% | April 25, 2036 |
| Revolving Funding Facility | 2,150 | SOFR + 2.00% | October 8, 2029 |
| SMBC Funding Facility | 800 | SOFR + 2.00% | March 28, 2029 |
Net Investment Income
Net investment income, which is a key performance metric, for the nine months ended September 30, 2024, was $1,044 million, an increase from $921 million in the same period of 2023.
| Metric | Q3 2024 (in millions) | Q3 2023 (in millions) | YTD 2024 (in millions) | YTD 2023 (in millions) |
|---|---|---|---|---|
| Net Investment Income | 361 | 289 | 1,044 | 921 |
| Net Income Per Common Share (Diluted) | $0.62 | $0.87 | $1.90 | $1.98 |
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Article updated on 8 Nov 2024
Resources:
- Ares Capital Corporation (ARCC) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Ares Capital Corporation (ARCC)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Ares Capital Corporation (ARCC)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.