Ares Capital Board Okays Reduction In Its Asset Coverage Requirement

(RTTNews) - Ares Capital Corp. (ARCC) said that its Board approved the application to the Company of the 150% minimum asset coverage ratio. As a result, the minimum asset coverage ratio applicable to the Company will be reduced from 200% to 150% on June 21, 2019.

Ares Capital Corporation's Board approved the reduction to the minimum statutory asset coverage following an extensive review of the Company's plan with respect to increased leverage flexibility, which included conversations with and important input from lenders, rating agencies and shareholders. Once the 150% coverage ratio becomes effective, the Company expects to use a modest amount of incremental leverage to continue to invest primarily in its current mix of investments with no fundamental change in the Company's investment strategy.

In addition, the company intends to target a debt to equity range of 0.90x to 1.25x. Finally, as part of the plan, the company is reducing its annual base management fee from 1.5% to 1.0% on all assets financed using leverage over 1.0x debt to equity.

As the Company implements this plan over the ensuing 12-36 months after the effective date, it intends to operate in a manner that it believes will maintain its investment grade rating while generating an incremental increase in annual core earnings per share of up to 20%, depending on leverage levels and other factors.