ARCC - Looking At Ares Capital's Financials Under Lower Interest Rates

2024-02-20 03:27:00 ET

Summary

• Ares Capital operates as a BDC lending to distressed and middle-market businesses, using leverage to enhance returns.
• The Chairman of the Federal Reserve expects at least three rate cuts later in the year, potentially impacting Ares' investments.
• Ares management has held excess earnings for reinvestment, potentially affecting future earnings and dividend payouts.

Ares Capital ( ARCC ) operates as a business development corporation ((BDC)) lending into both distressed and middle-market businesses. It uses leverage to enhance returns. As with some BDCs, many of Ares' investment instruments contain floating rate clauses for both investments and debt. The two tend to increase and decrease with changing marketplace interest rates, but the movement is biased. In Ares' case, the return bias leans toward higher with higher rates and vice versa....

For further details see: