Press release·10/28/2025 12:26:55

Overview

Ares Capital Corporation is a specialty finance company that operates as a closed-end, non-diversified management investment company. The company is externally managed by Ares Capital Management LLC, a subsidiary of Ares Management Corporation. Ares Capital’s investment objective is to generate both current income and capital appreciation through debt and equity investments, primarily in first lien senior secured loans, second lien senior secured loans, subordinated loans, and preferred equity.

Since its initial public offering in 2004, Ares Capital’s exited investments have generated an asset-level realized gross internal rate of return of approximately 13%. The company has also generated $1.1 billion in net realized gains over this period, excluding certain one-time transactions.

As a business development company (BDC), Ares Capital is required to comply with certain regulatory requirements, such as investing at least 70% of its total assets in “qualifying assets.” The company has also received an exemptive relief order from the SEC that allows it to co-invest with other BDCs and registered closed-end management investment companies managed by Ares Management and its affiliates.

Macroeconomic Environment

During the third quarter of 2025, the U.S. economy continued to show signs of strength, with growing GDP, stable inflation, and low unemployment. While future economic growth is expected to slow, the debt and equity markets have remained resilient, supported by anticipated accommodative monetary policies.

Portfolio and Investment Activity

Ares Capital’s investment activity for the three months ended September 30, 2025 and 2024 is summarized in the table below:

Metric	Q3 2025	Q3 2024
New investment commitments	$3,924 million	$3,919 million
Investment commitments exited	$2,625 million	$2,598 million
Net investment commitments	$1,299 million	$1,321 million
Principal amount of investments funded	$3,507 million	$3,283 million
Principal amount of investments sold or repaid	$2,635 million	$2,542 million
Number of new investment commitments	80	74
Weighted average yield of debt and other income-producing securities (funded during the period at amortized cost)	10.0%	10.3%

As of September 30, 2025, Ares Capital’s investments consisted of the following:

Investment Type	Amortized Cost	Fair Value
First lien senior secured loans	$17,963 million	$17,687 million
Second lien senior secured loans	$1,738 million	$1,649 million
Subordinated certificates of the SDLP	$1,048 million	$1,042 million
Senior subordinated loans	$1,484 million	$1,399 million
Preferred equity	$2,605 million	$2,461 million
Ivy Hill Asset Management, L.P.	$1,800 million	$2,018 million
Other equity	$1,929 million	$2,437 million
Total	$28,567 million	$28,693 million

The weighted average yields on Ares Capital’s portfolio as of September 30, 2025 and December 31, 2024 were as follows:

Metric	September 30, 2025	December 31, 2024
Debt and other income-producing securities (at amortized cost)	10.6%	11.1%
Total portfolio (at amortized cost)	9.6%	10.0%

Ares Capital uses an investment rating system to categorize its investments on a scale of 1 to 4, with 4 representing the least amount of risk. As of September 30, 2025, the weighted average grade of the investments in Ares Capital’s portfolio at fair value was 3.1, and loans on non-accrual status represented 1.8% of the total investments at amortized cost (or 1.0% at fair value).

Ivy Hill Asset Management, L.P.

Ivy Hill Asset Management, L.P. (IHAM) is Ares Capital’s wholly owned portfolio company and an SEC-registered investment adviser. As of September 30, 2025, IHAM had assets under management of approximately $13.5 billion and managed 22 investment vehicles.

The amortized cost and fair value of Ares Capital’s investments in IHAM as of September 30, 2025 were $1,800 million and $2,018 million, respectively. For the three and nine months ended September 30, 2025, IHAM had management and incentive fee income of $15 million and $39 million, respectively, and other investment-related income of $86 million and $199 million, respectively.

Senior Direct Lending Program

Ares Capital has established a joint venture with Varagon Capital Partners called the Senior Direct Lending Program (SDLP) to make certain first lien senior secured loans, including stretch senior and unitranche loans, primarily to U.S. middle-market companies. As of September 30, 2025, Ares Capital and a client of Varagon owned 87.5% and 12.5%, respectively, of the outstanding SDLP Certificates.

The amortized cost and fair value of Ares Capital’s SDLP Certificates as of September 30, 2025 were $1,048 million and $1,042 million, respectively, with a yield of 13.0% and 13.1% on an amortized cost and fair value basis, respectively. As of September 30, 2025, the SDLP portfolio was comprised of first lien senior secured loans to 23 primarily U.S. middle-market companies, with one loan on non-accrual status.

Results of Operations

Ares Capital’s operating results for the three and nine months ended September 30, 2025 and 2024 were as follows:

Metric	Q3 2025	Q3 2024	9M 2025	9M 2024
Total investment income	$782 million	$775 million	$2,259 million	$2,231 million
Total expenses	$433 million	$402 million	$1,188 million	$1,127 million
Net investment income before income taxes	$349 million	$373 million	$1,071 million	$1,104 million
Net investment income	$338 million	$361 million	$1,045 million	$1,074 million
Net realized gains (losses) on investments, foreign currency, and other transactions	$162 million	$(24) million	$135 million	$(60) million
Net unrealized gains (losses) on investments, foreign currency, and other transactions	$(96) million	$57 million	$(174) million	$165 million
Net increase in stockholders’ equity resulting from operations	$404 million	$394 million	$1,006 million	$1,165 million

Interest income from investments for the three months ended September 30, 2025 decreased from the comparable period in 2024 primarily due to declining base rates, partially offset by an increase in the average size of Ares Capital’s portfolio. Capital structuring service fees increased due to an increase in new investment commitments.

Dividend income for the three and nine months ended September 30, 2025 included $73 million and $219 million, respectively, from IHAM, reflecting the increased earnings from IHAM’s investment vehicles.

Total expenses increased for the three and nine months ended September 30, 2025 compared to the same periods in 2024, primarily due to higher interest and credit facility fees, base management fees, and capital gains incentive fees.

Ares Capital recorded net realized gains of $162 million and $135 million for the three and nine months ended September 30, 2025, respectively, compared to net realized losses of $24 million and $60 million for the same periods in 2024. The company also recorded net unrealized losses of $96 million and $174 million for the three and nine months ended September 30, 2025, respectively, compared to net unrealized gains of $57 million and $165 million for the same periods in 2024.

Financial Condition, Liquidity, and Capital Resources

As of September 30, 2025, Ares Capital had $1.0 billion in cash and cash equivalents and $15.6 billion in total aggregate principal amount of outstanding debt, with an asset coverage ratio of 192%. The company had approximately $5.2 billion available for additional borrowings under its credit facilities as of September 30, 2025.

Ares Capital may issue and sell shares of its common stock through public or “at the market” offerings. During the nine months ended September 30, 2025, the company issued and sold 41.3 million shares of common stock for gross proceeds of $915.1 million.

The company’s debt obligations consist of a revolving credit facility, a revolving funding facility, a SMBC funding facility, a BNP funding facility, and various unsecured notes. As of September 30, 2025, the weighted average stated interest rate and weighted average maturity of all outstanding debt were 5.1% and 4.1 years, respectively.

Outlook

Ares Capital’s financial performance and portfolio quality have remained strong, despite the evolving macroeconomic environment. The company’s diversified investment portfolio, prudent risk management, and access to diverse funding sources position it well to navigate potential market volatility and capitalize on future investment opportunities.

However, the company’s results can be impacted by various factors, including the level of new investment commitments, changes in base interest rates, and the recognition of realized gains and losses and unrealized appreciation and depreciation. Investors should carefully consider these factors when evaluating Ares Capital’s financial condition and performance.

Overall, Ares Capital appears to be well-positioned to continue generating current income and capital appreciation for its shareholders, though the company’s future results may vary.