(The following statement was released by the rating agency)
Oct 10 - Fitch Ratings has assigned a rating of 'BBB' to Ares Capital Corporation's
(Ares) $230 million issuance of 4.75% unsecured convertible notes. The notes will mature in January 2018.
Fitch does not believe there will be a material impact on the company's leverage levels as a result of the issuance, as proceeds will largely be used to repay borrowings on secured credit facilities.
RATING DRIVERS AND SENSITIVITIES
Ares currently has a Stable Rating Outlook, which reflects Fitch's expectation for continued consistency in core operating performance, and the maintenance of strong liquidity, relatively conservative balance sheet leverage, and solid cash earnings coverage of the dividend.
Negative rating actions would be driven by an extended increase in leverage above the targeted range, resulting from increased borrowings or material unrealized depreciation, and/or a meaningful increase in the proportion of equity holdings without a commensurate decline in leverage. A spike in non-accrual levels and weaker cash income dividend coverage would also be viewed unfavorably from a ratings perspective.
Fitch believes the potential for positive rating actions is relatively limited at the present time, given significant market volatility, but positive rating momentum could develop from a continuation of demonstrated access to the debt and equity markets, to ensure adequate funding flexibility, and the deployment of capital into investments with attractive risk-adjusted return prospects, which yield consistent earnings growth, stable asset quality, and strong dividend coverage.
Headquartered in New York, NY, Ares is an externally managed business development company, organized on April 16, 2004. As of June 30, 2012 the company had investments in 144 portfolio companies amounting to approximately $5.5 billion.
Fitch has assigned the following rating:
Ares Capital Corporation: --$230 million Unsecured Convertible Notes 'BBB'.
Existing ratings for Ares are as follows:
Ares Capital Corporation --Long-term IDR of 'BBB'; --Senior Secured Debt of 'BBB'; --Senior Unsecured Debt of 'BBB'. Allied Capital Corporation --Senior Unsecured Debt of 'BBB'. The Rating Outlook is Stable.
(Caryn Trokie, New York Ratings Unit)