Ares Capital Corporation (ARCC)

Get ARCC Alerts
*Delayed - data as of May 26, 2015  -  Find a broker to begin trading ARCC now
Exchange: NASDAQ

Community Rating:
View:    ARCC Pre-Market
Symbol List Views
FlashQuotes InfoQuotes
Stock Details
Summary Quote Real-Time Quote After Hours Quote Pre-market Quote Historical Quote Option Chain
Basic Chart Interactive Chart
Company Headlines Press Releases Market Stream
Analyst Research Guru Analysis Stock Report Competitors Stock Consultant Stock Comparison
Call Transcripts Annual Report Income Statement Revenue/EPS SEC Filings Short Interest Dividend History
Ownership Summary Institutional Holdings Insiders
(SEC Form 4)
 Save Stocks

Ares Capital (ARCC)

Q3 2011 Earnings Call

November 08, 2011 11:00 am ET


Michael J. Arougheti - President and Director

Penni F. Roll - Chief Financial Officer


John Hecht - JMP Securities LLC, Research Division

Jasper Burch - Macquarie Research

Richard B. Shane - JP Morgan Chase & Co, Research Division

Joel Houck - Wells Fargo Securities, LLC, Research Division

Greg Mason - Stifel, Nicolaus & Co., Inc., Research Division

Dean Choksi - UBS Investment Bank, Research Division

John Stilmar - SunTrust Robinson Humphrey, Inc., Research Division

John T. G. Rogers - Janney Montgomery Scott LLC, Research Division



Good morning. Welcome to Ares Capital Corporation's Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Tuesday, November 8, 2011.

Comments made during the course of this conference call and webcast and accompanying documents contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of the words such as anticipates, believes, expects, intends, will, should, may and similar expressions. The company's actual results could differ materially from those expressed in the forward-looking statements for any reason, including those listed in its SEC filings. Ares Capital Corporation assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results.

During this conference call, the company may discuss core earnings per share or core EPS, which is a non-GAAP financial measure as defined by SEC Regulation G. Core EPS, excluding professional fees and other costs related to Ares Capital Corporation's acquisition of Allied Capital Corporation, is the net per share increase or decrease in stockholders' equity resulting from operations, less professional fees and other costs related to the Allied Acquisition, realized and unrealized gains and losses, any incentive management fees attributable to such realized and unrealized gains and losses, any income taxes related to such realized gains and other adjustments as noted.

A reconciliation of core EPS, excluding professional fees and other costs related to the Allied acquisition, to the net per share increase or decrease in stockholders' equity resulting from operations to the most directly comparable GAAP financial measure can be found on the company's website at The company believes that core EPS provides useful information to investors regarding financial performance because it is one method the company uses to measure its financial condition and results of operations.

Certain information discussed in this presentation, including information relating to portfolio companies, was derived from third-party sources, and has not been independently verified. And accordingly, the company makes no representation or warranty in respect of this information.

At this time, we would like to invite participants to access the accompanying slide presentation by going to the company's website at, and clicking on the Q3 '11 Investor Presentation link on the homepage of the Investor Resources section of the website. Ares Capital Corporation's earnings release and quarterly report are also available on the company's website.

I will now turn the call over to Mr. Michael Arougheti, Ares Capital Corporation's President. Mr. Arougheti, the floor is yours, sir.

Michael J. Arougheti

Great. Thank you. Good morning, everyone, and thanks for joining us. I'm joined today by the Senior Partners of Ares Management's Private Debt Group, Eric Beckman, Kipp deVeer, Mitch Goldstein and Michael Smith; our Chief Financial Officer, Penni Roll; and Carl Drake and Scott Lem, who Head our Investor Relations and Accounting teams, respectively.

This morning, we issued our third quarter earnings press release and posted an investor presentation on our website that highlights certain financial data. We'll refer to this information presentation later in our call.

I'd also like to first start with a discussion of recent market trends and how they continue to influence our business and strategy. I'll then highlight key elements of our third quarter performance before turning the call over to Penni, who will take you through our quarterly results in greater detail. Finally, I'll cover our recent investment activity, the state of our current portfolio and update you on our backlog and pipeline before taking questions.

Throughout this year, liquidity in the debt capital markets has ebbed and flowed, often influenced by macroeconomic and political events. Rapidly changing fund flows have influenced loan volume, repayments, pricing and ultimately, the risk-adjusted return opportunity for capital providers. Following slowing inflows into bank loan and high-yield bond funds during the second quarter, the market experienced a sharp reversal during the third quarter, as investors reacted toward increased European sovereign debt issued, the fallout from the U.S. Treasury debt downgrade and signs of slowing economic trends.

The ensuing volatility generally lead to reduced loan and high-yield bond volume, increased credit spreads and more conservative capital structures. For example, according to S&P, third quarter broadly syndicated new issue leverage loan volume declined 57%, and high-yield new issue volume dropped by 70% compared to second quarter levels. Also, during the third quarter, average credit spreads widened by approximately 200 basis points in the broadly syndicated leveraged loan market and leverage multiples began to head slightly lower. In addition, the S&P/LSTA Leveraged Loan Index declined about 5%, and the Merrill Lynch High Yield Master II Index declined more than 8% during the third quarter.

Our core market, the middle market for leveraged loans, was less volatile during the third quarter, as most investors in our market are buy-and-hold in nature and are less likely to quickly exit investments in reaction response to global capital markets events. For example, according to Thomson Reuters' middle market loan index, bid prices declined only 2.2% during the third quarter.

Read the rest of this transcript for free on