Fitch Expects to Rate Ares Capital Unsecured Notes 'BBB'

  Fitch Expects to Rate Ares Capital Unsecured Notes 'BBB'

Business Wire

NEW YORK -- November 12, 2013

Fitch Ratings expects to assign a rating of 'BBB' to Ares Capital
Corporation's (Ares) unsecured institutional debt issuance. Fitch does not
expect there to be a material impact on the company's leverage levels as a
result of the issuance, as proceeds will be used to repay borrowings on
secured credit facilities.

Fitch views positively the firm's ability to access the institutional bond
market, which has had limited participation in the industry since the onset of
the financial crisis. Access to this market will provide Ares with more
funding flexibility going forward, in Fitch's opinion.

KEY RATING DRIVERS

The expected rating is equalized with the ratings assigned to Ares' existing
senior unsecured debt as the new notes will rank equally in the capital
structure. The equalization of the unsecured ratings with the secured debt
rating reflects Ares' relatively low leverage, its focus on senior debt
investments, and Fitch's expectation that proceeds from the issuance will be
used to repay a portion of secured debt outstanding, thus increasing the
amount of unsecured funding in the capital structure.

Ares long-term Issuer Default Rating has a Positive Rating Outlook reflecting
peer-superior funding flexibility, operating consistency throughout the recent
downturn, a strong liquidity profile, and conservative dividend strategy. At
Sept. 30, 2013, approximately 71% of the company's debt was considered
unsecured and borrowing capacity on the revolving facilities was approximately
$1.1 billion, or approximately $1.3 billion pro forma for the October 2013
equity raise.

RATING SENSITIVITIES

Ares' ratings could potentially be upgraded over the next 12-18 months
provided the company demonstrates measured portfolio growth in the face of
what Fitch believes is an overheating credit environment. This will be
evaluated in the context of the stability and consistency of Ares' operating
performance, asset quality, valuation, and underlying portfolio metrics,
including leverage and interest coverage. Specifically, up-ticks in underlying
portfolio leverage, and/or deterioration in portfolio company interest
coverage or overall portfolio yields, could signal the potential for asset
quality issues down the road, which would likely lead to an Outlook revision.

Conversely, 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.

Headquartered in New York, NY, Ares is an externally managed business
development company, organized on April 16, 2004. As of Sept. 30, 2013, the
company had investments in 175 portfolio companies amounting to approximately
$7.4 billion.

Fitch expects to assign the following rating:

Ares Capital Corporation:

-- Unsecured Debt 'BBB'.

Existing ratings for Ares are as follows:

Ares Capital Corporation

--Long-term IDR 'BBB';

--Senior Secured Debt 'BBB'; and

--Senior Unsecured Debt 'BBB'.

Allied Capital Corporation

--Senior Unsecured Debt 'BBB'.

The Rating Outlook is Positive.

Additional information is available at 'www.fitchratings.com'

Applicable Criteria and Related Research:

--'Global Financial Institutions Criteria' (August 2012);

--'Investment Manager and Alternative Funds Criteria' (December 2012).

Applicable Criteria and Related Research:

Global Financial Institutions 2013 Outlooks Compendium

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=701132

Investment Manager and Alternative Funds Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=696673

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=807817

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Contact:

Fitch Ratings, New York
Media Relations
Brian Bertsch, +1-212-908-0549
brian.bertsch@fitchratings.com
or
Primary Analyst
Senior Director
Meghan Neenan, CFA, +1-212-908-9121
or
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Associate Director
Katherine Hughes, +1-312-368-3123
or
Committee Chairperson
Senior Director
Tara Kriss, +1-212-908-0369
 
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