High yield loan specialist Ares Capital Management - an affiliate of Los Angeles-based investment manager Ares Management LLC - has formed a new entity to lend to the middle market and second lien secured loan market, as well as mezzanine and private equity. The new company, called Ares Capital Corp., plans to use securitization as a funding source for portfolio growth, although it is currently in the process of raising cash through a stock offering of $450 million via Merrill Lynch.
Through it subsidiaries, Ares Management has been a repeat issuer of high yield loan CLOs, structuring eight since 1998. In March, the firm priced $550 million of fixed- and floating-rate series VIII paper via JPMorgan Securities.
Once public, ACC will qualify as a Regulated Investment Company (RIC), according to the N2 filing made recently with the Securities and Exchange Commission.
RICs do not pay corporate-level federal income taxes on any ordinary income or capital gains that they distribute to stockholders as dividends.
To maintain RIC status, ACC warns in its prospectus, it may need to "dispose of certain investments quickly," should it be close to breaching certain qualification triggers.
Ares Management was in the news recently for its $30 million investment in restaurant chain House of Blues Entertainment Inc., as part of the company's $110 million recapitalization. Also, Ares agreed to acquire lingerie manufacturer Maidenform Inc. for an undisclosed price.
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