Ares Capital Corporation (Nasdaq: ARCC) announced that it has agreed to sell to initial purchasers in a private offering $200 million aggregate principal amount of its 4.75% Convertible Senior Notes due 2018. Ares Capital has also granted the initial purchasers an option to purchase up to an additional $30 million aggregate principal amount of the Convertible Senior Notes to cover over-allotments, if any. The Convertible Senior Notes will be offered only to qualified institutional buyers (as defined in the Securities Act of 1933, as amended (the “Securities Act”)) pursuant to Rule 144A under the Securities Act. The closing of the transaction is subject to customary closing conditions and the Convertible Senior Notes are expected to be delivered and paid for on October 10, 2012. The Convertible Senior Notes are unsecured and bear interest at a rate of 4.75% per year, payable semiannually. In certain circumstances, the Convertible Senior Notes will be convertible into cash, shares of Ares Capital’s common stock or a combination of cash and shares of Ares Capital’s common stock, at Ares Capital’s election, at an initial conversion rate of 50.3290 shares of common stock per $1,000 principal amount of Convertible Senior Notes, which is equivalent to an initial conversion price of approximately $19.87 per share of Ares Capital’s common stock, subject to customary anti-dilution adjustments. The conversion price is approximately 17.5% above the $16.91 per share closing price of Ares Capital’s common stock on October 3, 2012. Ares Capital will not have the right to redeem the Convertible Senior Notes prior to maturity. The Convertible Senior Notes will mature on January 15, 2018, unless repurchased or converted in accordance with their terms prior to such date. Ares Capital expects to use the net proceeds of this offering to repay or repurchase certain outstanding indebtedness, which may include repaying outstanding indebtedness under its debt facilities and, to the extent not applied for such purpose, for general corporate purposes, including investing in portfolio companies in accordance with its investment objective.
Before you invest in business development companies (BDCs) holding loans with real estate or other hard assets and mortgage real estate investment trusts (mREITs), understand these differences between the two instruments.