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Ares Capital Corporation Declares First Quarter 2013 Dividend Of $0.38 Per Share And Announces December 31, 2012 Financial Results

The fair value of Ares Capital’s portfolio investments at December 31, 2012 was $5.9 billion, including $5.2 billion in debt and other income producing securities. These portfolio investments at fair value were comprised of approximately 60% of senior secured debt securities (39% in first lien loans and 21% in second lien loans), 21% of subordinated certificates of the SSLP (the proceeds of which were applied to co-investments with GE in first lien senior secured loans through the SSLP), 5% of senior subordinated debt securities, 4% of preferred equity securities and 10% of other equity securities. As of December 31, 2012, the weighted average yield of debt and other income producing securities in the portfolio at fair value was 11.3%(4) (11.4% at amortized cost(5)) and 75% of the investments at fair value were in floating rate securities.

President Michael Arougheti commented, “Our strong fourth quarter results concluded a very good year for us in which we reported our highest level of annual core earnings per share, generated another year of net realized gains and increased our dividends and book value. We believe that our business is well positioned with no near term debt maturities, modest leverage and a significant amount of available debt capacity.” Mr. Arougheti continued, “Given our strong performance in 2012, we estimate that we will be carrying over undistributed taxable income into 2013 of approximately $0.96 per share.”


Ares Capital Management LLC, our investment adviser, employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our investment adviser grades the credit risk of all investments on a scale of 1 to 4 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of acquisition), although it may also take into account under certain circumstances the performance of the portfolio company’s business, the collateral coverage of the investment and other relevant factors. Under this system, investments with a grade of 4 involve the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit. Investments graded 3 involve a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing as expected and the risk factors to our ability to ultimately recoup the cost of our investment are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a grade of 3. Investments graded 2 indicate that the risk to our ability to recoup the initial cost basis of such investment has increased materially since origination or acquisition, including as a result of factors such as declining performance and non-compliance with debt covenants; however, payments are generally not more than 120 days past due. An investment grade of 1 indicates that the risk to our ability to recoup the initial cost basis of such investment has substantially increased since origination or acquisition, and the portfolio company likely has materially declining performance. For debt investments with an investment grade of 1, most or all of the debt covenants are out of compliance and payments are substantially delinquent. For investments graded 1, it is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit. For investments graded 1 or 2, our investment adviser enhances its level of scrutiny over the monitoring of such portfolio company. Our investment adviser grades the investments in our portfolio at least each quarter and it is possible that the grade of a portfolio investment may be reduced or increased over time.

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