TEXT-Fitch expects to rate Ares Capital convertible notes 'BBB'
Oct 4 - Fitch Ratings expects to assign a rating of 'BBB' to Ares Capital Corporation's (Ares) $200 million issuance of 4.75% unsecured convertible notes. The notes will mature in January 2018. Fitch does not believe there will be a material impact on the company's leverage levels as a result of the issuance, as proceeds will largely be used to repay borrowings on secured credit facilities. RATING DRIVERS AND SENSITIVITES Ares currently has a Stable Rating Outlook, which reflects Fitch's expectation for continued consistency in core operating performance, and the maintenance of strong liquidity, relatively conservative balance sheet leverage, and solid cash earnings coverage of the dividend. Negative rating actions would be driven by an extended increase in leverage above the targeted range, resulting from increased borrowings or material unrealized depreciation, and/or a meaningful increase in the proportion of equity holdings without a commensurate decline in leverage. A spike in non-accrual levels and weaker cash income dividend coverage would also be viewed unfavorably from a ratings perspective. Fitch believes the potential for positive rating actions is relatively limited at the present time, given significant market volatility, but positive rating momentum could develop from a continuation of demonstrated access to the debt and equity markets, to ensure adequate funding flexibility, and the deployment of capital into investments with attractive risk-adjusted return prospects, which yield consistent earnings growth, stable asset quality, and strong dividend coverage. Headquartered in New York, NY, Ares is an externally managed business development company, organized on April 16, 2004. As of June 30, 2012, the company had investments in 144 portfolio companies amounting to approximately $5.5 billion. Fitch expects to assign the following rating: Ares Capital Corporation: --$200 million unsecured convertible notes at 'BBB'. Fitch currently rates Ares as follows: Ares Capital Corporation --Long-term Issuer Default Rating (IDR) 'BBB'; --Senior secured debt 'BBB'; and --Senior unsecured debt 'BBB'. Allied Capital Corporation --Senior unsecured debt 'BBB'. The Rating Outlook is Stable. Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. Applicable Criteria and
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