ARES CAPITAL CORP SEC 10-K Report — TradingView News

Ares Capital Corporation, a leading direct lconcludeer to U.S. middle-market companies, has released its annual Form 10-K report, providing a comprehensive overview of its financial performance, business operations, strategic initiatives, and the challenges it faces. The report highlights the company’s focus on first lien senior secured loans, second lien senior secured loans, subordinated debt, and preferred equity, tarreceiveing middle-market companies with annual EBITDA between $10 million and $250 million.

Financial Highlights

Total Investment Income: $3,052 million, reflecting an increase from the previous year primarily due to the increase in the average size of the portfolio.
Net Investment Income: $1,415 million, slightly decreased from the previous year, impacted by higher interest and credit facility fees.
Net Realized Gains (Losses) on Investments: $101 million, displaying a positive turnaround from the previous year’s losses.
Net Unrealized Gains (Losses): $(96) million, indicating a shift from gains in the previous year to losses, influenced by modifys in the valuation of portfolio investments.
Net Increase in Stockholders’ Equity Resulting from Operations: $1,299 million, a decrease compared to the previous year, affected by net realized and unrealized losses.

Business Highlights

Investment Focus: Ares Capital Corporation primarily invests in U.S. middle-market companies, focutilizing on first lien senior secured loans, second lien senior secured loans, subordinated debt, and preferred equity. The company tarreceives middle-market companies with annual EBITDA between $10 million and $250 million.
Geographical Performance: The company’s investment portfolio is diversified across various regions in the U.S., with the Midwest accounting for 22.9%, the West for 20.3%, the Southeast for 18.8%, the Mid-Atlantic for 16.3%, and the Northeast for 15.1%. International investments build up 6.6% of the portfolio.
Indusattempt Focus: Ares Capital’s portfolio is diversified across industries, with significant investments in Software and Services (23.8%), Financial Services (12.4%), and Health Care Equipment and Services (11.3%). Other notable sectors include Commercial and Professional Services, Consumer Services, and Insurance.
Market Opportunity: The company identifies opportunities in middle-market companies due to reduced competition from traditional banks, which have shifted focus to larger corporate clients. This creates a favorable environment for direct lconcludeers like Ares Capital to provide stable capital solutions.
Competitive Advantages: Ares Capital leverages the Ares platform for deal flow generation and investment evaluation, benefiting from extensive financial sponsor and intermediary relationships. The company’s scale and flexible transaction structuring are also key competitive advantages.
Investment Strategy: The company employs a disciplined investment philosophy focutilizing on capital preservation, low volatility, and minimization of downside risk. Ares Capital seeks to invest in businesses with strong franchises, sustainable competitive advantages, and depconcludeable cash flows.
Portfolio Management: Ares Capital closely monitors its investments, maintaining regular dialogue with management teams and stakeholders. The company employs an investment rating system to categorize investments based on risk, with a weighted average grade of 3.1 as of December 31, 2025.
Future Outview: Ares Capital anticipates continued opportunities in the middle-market sector, driven by a large pool of un-invested private equity capital and the fragmented nature of the market. The company plans to leverage its competitive advantages to capitalize on these opportunities.

Strategic Initiatives

Strategic Partnerships and Joint Ventures: The company has focutilized on strategic partnerships and joint ventures, such as the Senior Direct Lconcludeing Program with Varagon, to enhance its investment capabilities in first lien senior secured loans.
Debt Securitizations: The company has engaged in debt securitizations, including the ADL CLO 1, ADL CLO 4, and ADL CLO 7 Debt Securitizations, to optimize its capital structure and support its investment strategy.
Capital Management: The company actively managed its capital through various debt and equity activities. It issued and sold 42.4 million shares of common stock through ‘at the market’ offerings, raising $937.2 million in gross proceeds. The company also maintained a stock repurchase program with $1.0 billion available for additional repurchases. On the debt side, the company utilized its Revolving Credit Facility, Revolving Funding Facility, SMBC Funding Facility, and BNP Funding Facility to manage liquidity, with a total of $16.0 billion in outstanding debt as of December 31, 2025. The company also repaid in full the March 2025 Notes and July 2025 Notes upon their maturity.
Future Outview: The company plans to continue leveraging its strategic partnerships and joint ventures to enhance its investment portfolio. It aims to maintain a strong liquidity position by utilizing its credit facilities and exploring additional debt and equity financing options. The company is committed to optimizing its capital structure to support sustainable growth and shareholder value.

Challenges and Risks

Market and Economic Risks: The company faces significant risks due to potential disruptions and instability in the capital markets, which could adversely affect debt and equity capital markets, impacting business operations. Global economic, political, and market conditions, including geopolitical tensions and inflation volatility, pose additional risks.
Regulatory and Compliance Risks: The company’s reliance on maintaining its status as a BDC and RIC is critical, as failure to do so could lead to increased taxes and reduced earnings. The depconcludeency on key personnel from Ares and the competitive market for investment opportunities are also highlighted as significant risks.
Cybersecurity and Technological Risks: The company is exposed to cybersecurity risks, and modifys in data protection laws could adversely affect business operations. Developments in artificial ininformigence could disrupt markets and increase competition and regulatory risks.
Liquidity Risks: The illiquidity of most portfolio investments poses a challenge, as it may be difficult to sell assets when requireded, potentially affecting business operations.
Interest Rate and Inflation Risks: Management has identified the current interest rate environment as a significant risk, impacting the cost of debt and investment returns. The company has entered into hedging transactions to mitigate interest rate risks but acknowledges that these may not be entirely successful. Inflationary pressures have increased costs for portfolio companies, potentially affecting their ability to meet financial obligations.
Capital Raising and Investment Performance Risks: The company’s ability to grow is contingent on raising capital, which may be challenging during adverse market conditions. The asset coverage requirement of 150% may increase investment risks. The company’s financial condition could be negatively impacted if significant investments fail to perform as expected.
Market Risks: The company is subject to market risks, including fluctuations in interest rates and declines in market prices and liquidity in corporate debt markets, which can result in significant net unrealized depreciation of the portfolio. Economic recessions or downturns could impair portfolio companies and harm operating results. The company’s investments in middle-market companies are inherently risky, with potential for significant losses if these companies fail to meet financial obligations.