Ares Capital Corporation (ARCC)

Executive Summary

Ares Capital agreed on October 27 to buy MidCap Financial Investment Corp. for $10.88 a share, about 85% of MidCap’s estimated September net asset value. Ares Management pays $1.21 of that in cash, so Ares Capital’s own stock covers about 75 cents per dollar of book. The same morning Ares Capital reported third-quarter core earnings of $0.46 a share against a $0.48 dividend, with non-accruals flat at 2.4% of cost and $1.37 a share of spillover income. We compare the deal price with where OTF, OBDC and MSDL trade, all three below what the largest BDC just paid for a peer, and work through what the price implies for each.

What’s Inside The Full Report

• Executive summary and key points
• What Ares Capital Is Paying For MidCap
• The Third Quarter
• How Ares Capital Funds Itself
• Seven Years Of Results
• The Peers Against The Deal Price
• Risks
• Our Conclusion
• TTCM rating and position disclosure