Ares as Debt Investment

Chidem Kurdas

Ares Management is a Los Angeles-based debt specialist and private equity firm with $40 billion in assets that runs a Nasdaq-listed business development company in addition to private funds and accounts.

If you want a publicly traded private debt investment, Ares Capital Corp. sounds like a worthwhile candidate. Launched in 2004, this is a large BDC—one of the largest, with $13 billion in committed capital as of the end of March. It invests in the senior loans, mezzanine debt and to a lesser extent equity of middle-market businesses.  

It plans to raise additional capital in the public market with offerings of up to $2 billion in common stock and other securities.  Middle-market firms offer ample opportunity and Ares has been planning public offerings for over a year.  

The problem is the share price. The stock underperformed the Dow Jones in the past 12 months.

Last year Ares acquired Allied Capital—the same Allied that David Einhorn long criticized for the way it valued portfolio companies. As Ares acquired Allied, an agreement was announced between Allied, a company it owned called  Business Loan Express, the Securities and Exchange Commission and the Department of Justice. The purchase was not good for Ares’ own stock but its effect should wear out.

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