Ares Capital(ARCC) - 2025 Q1 - Quarterly Report

Part I Item 1. Financial Statements This section presents the unaudited consolidated financial statements of Ares Capital Corporation and its subsidiaries, including the balance sheet, statement of operations, schedule of investments, statement of stockholders' equity, statement of cash flows, and accompanying notes, providing a detailed financial overview for the periods ended March 31, 2025, and December 31, 2024 Consolidated Balance Sheet Presents the company's financial position, including assets, liabilities, and equity, as of March 31, 2025, and December 31, 2024 Consolidated Balance Sheet | Indicator | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :----------------------------------- | :----------------------------- | :----------------------------- | | Total assets | $28,317 | $28,254 | | Total liabilities | $14,645 | $14,899 | | Total stockholders' equity | $13,672 | $13,355 | | Net assets per share | $19.82 | $19.89 | - Investments at fair value increased from $26,720 million as of December 31, 2024, to $27,130 million as of March 31, 2025[10] - Debt increased from $13,727 million as of December 31, 2024, to $13,922 million as of March 31, 2025[10] Consolidated Statement of Operations Details the company's revenues, expenses, and net income for the three months ended March 31, 2025, and March 31, 2024 Consolidated Statement of Operations | Indicator | For the Three Months Ended March 31, 2025 (in millions) | For the Three Months Ended March 31, 2024 (in millions) | | :---------------------------------------------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | | Total investment income | $732 | $701 | | Total expenses | $360 | $369 | | Net investment income | $365 | $325 | | Net increase in stockholders' equity resulting from operations | $241 | $449 | | Basic and diluted net income per common share | $0.36 | $0.76 | - Total investment income increased by $31 million (4.4%) from $701 million in Q1 2024 to $732 million in Q1 2025[12] - Net investment income increased by $40 million (12.3%) from $325 million in Q1 2024 to $365 million in Q1 2025[12] - Net increase in stockholders' equity resulting from operations decreased by $208 million (46.3%) from $449 million in Q1 2024 to $241 million in Q1 2025, primarily due to higher net realized losses and net unrealized losses in 2025[12] Consolidated Schedule of Investments Provides a detailed listing and valuation of the company's investment portfolio as of March 31, 2025, and December 31, 2024 - Total investments at fair value were $27,130 million as of March 31, 2025, compared to $26,720 million as of December 31, 2024[10] - The amortized cost of total investments was $26,778 million as of March 31, 2025, compared to $26,374 million as of December 31, 2024[10] - As of March 31, 2025, investments at fair value represented 198.44% of Net Assets[142] Derivative Instruments Outlines the company's use of foreign currency forward contracts and interest rate swaps to manage market risks Derivative Instruments | Type of Derivative | Total Notional Amount (in millions) | Unrealized Appreciation / (Depreciation) (in millions) | | :------------------------- | :---------------------------------- | :----------------------------------------------------- | | Foreign currency forward | $899 | $(19) | | Interest rate swaps | $3,750 | $55 | - The company uses foreign currency forward contracts and interest rate swaps to mitigate foreign currency and interest rate risk exposures[180][464] Notes to Consolidated Financial Statements Provides explanatory details and disclosures supporting the consolidated financial statements 1. Organization Describes the company's structure, investment objectives, and external management arrangements - Ares Capital Corporation is a specialty finance company regulated as a Business Development Company (BDC) and has elected to be treated as a Regulated Investment Company (RIC) for tax purposes[322] - The company's investment objective is to generate current income and capital appreciation through debt and equity investments, primarily focusing on first and second lien senior secured loans, subordinated loans, and preferred equity[323] - The company is externally managed by Ares Capital Management LLC, a subsidiary of Ares Management Corporation, with administrative services provided by Ares Operations LLC[324] 2. Significant Accounting Policies Details the accounting principles and methods used in preparing the financial statements - Financial statements are prepared in conformity with U.S. GAAP for investment companies (ASC 946) and reflect all necessary adjustments for fair presentation[325][326] - Investments are recorded at fair value, with market quotations used when available, and non-publicly traded securities valued in good faith by the Valuation Designee, subject to board oversight and independent third-party valuation providers (IVPs)[333][334] - Interest income includes accretion of discounts, amortization of premiums, and Payment-in-Kind (PIK) interest, recognized on an accrual basis. Loans are generally placed on non-accrual status if payments are 30+ days past due or collectability is doubtful[339][340] Cash, Cash Equivalents and Restricted Cash Reconciliation | Category | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :----------------------------------------------------------------------- | :--------------------------- | :--------------------------- | | Cash and cash equivalents | $647 | $635 | | Restricted cash | $95 | $225 | | Total cash, cash equivalents and restricted cash shown in cash flow statement | $742 | $860 | 3. Agreements Summarizes key contractual agreements, including investment advisory, management, and administration fees - The investment advisory and management agreement with Ares Capital Management includes a base management fee (1.5% on assets up to 1.0x debt-to-equity, 1.0% on leverage over 1.0x), an income-based fee (20% of pre-incentive fee net investment income exceeding a 1.75% hurdle rate, with a 'catch-up' provision), and a capital gains incentive fee (20% of cumulative aggregate realized capital gains, net of losses and unrealized depreciation)[365][366][370][371] Management and Incentive Fees | Fee Type | For the Three Months Ended March 31, 2025 (in millions) | For the Three Months Ended March 31, 2024 (in millions) | | :------------------------ | :------------------------------------------------------ | :------------------------------------------------------ | | Base management fee | $102 | $87 | | Income based fee | $85 | $88 | | Capital gains incentive fee | $(25) | $25 | - A capital gains incentive fee of $(25) million was calculated in accordance with GAAP for Q1 2025, compared to $25 million in Q1 2024, primarily due to net losses on investments and foreign currency transactions[377][378] - The administration agreement with Ares Operations LLC covers office equipment, clerical, bookkeeping, and record-keeping services, with fees based on the company's allocable portion of overhead and other expenses[382] 4. Investments Presents the composition, fair value, and credit quality of the company's investment portfolio Investment Portfolio Composition (Fair Value) | Investment Type | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :----------------------------------- | :--------------------------- | :--------------------------- | | First lien senior secured loans | $15,901 | $15,179 | | Second lien senior secured loans | $1,532 | $1,847 | | Subordinated certificates of the SDLP | $1,115 | $1,192 | | Senior subordinated loans | $1,366 | $1,351 | | Preferred equity | $2,645 | $2,649 | | Ivy Hill Asset Management, L.P. | $1,920 | $1,915 | | Other equity | $2,651 | $2,587 | | Total | $27,130 | $26,720 | Geographic Composition of Portfolio (Fair Value) | Geographic Region | March 31, 2025 (%) | December 31, 2024 (%) | | :---------------- | :----------------- | :-------------------- | | West | 23.6 | 25.2 | | Midwest | 21.6 | 20.9 | | Southeast | 18.5 | 19.3 | | Mid-Atlantic | 16.5 | 16.1 | | Northeast | 13.6 | 12.2 | | International | 6.2 | 6.3 | | Total | 100.0 | 100.0 | - Loans on non-accrual status represented 1.5% of total investments at amortized cost (0.9% at fair value) as of March 31, 2025, a decrease from 1.7% at amortized cost (1.0% at fair value) as of December 31, 2024[392] - Ivy Hill Asset Management, L.P. (IHAM), a wholly owned portfolio company, had assets under management of approximately $12.9 billion as of March 31, 2025[394] - The Senior Direct Lending Program (SDLP) had total first lien senior secured loans of $4,691 million at principal amount as of March 31, 2025, with 20 borrowers. One loan was on non-accrual status[415] 5. Debt Details the company's outstanding debt obligations, asset coverage, and interest rate management strategies - As of March 31, 2025, the company's asset coverage ratio was 198%, exceeding the 150% regulatory requirement[417] Outstanding Debt Summary | Debt Instrument | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :--------------------------- | :--------------------------- | | Revolving Credit Facility | $1,113 | $1,113 | | Revolving Funding Facility | $1,030 | $1,065 | | SMBC Funding Facility | $400 | $502 | | BNP Funding Facility | $785 | $889 | | April 2036 CLO Notes | $473 | $473 | | October 2036 CLO Secured Loans | $541 | $541 | | Unsecured Notes | $9,583 | $9,144 | | Total Carrying Value | $13,922 | $13,727 | - The weighted average stated interest rate for all outstanding debt was 4.9% as of both March 31, 2025, and December 31, 2024, with a weighted average maturity of 3.9 years and 3.8 years, respectively[421] - In March 2025, the company repaid in full $600 million of March 2025 Notes upon maturity[456] - The company has entered into interest rate swaps for certain unsecured notes (January 2027, March 2029, July 2029, and March 2032 Notes) to align interest rates with its floating-rate investment portfolio[457][458] 6. Derivative Instruments Provides detailed information on the company's derivative financial instruments and their impact on financial results Foreign Currency Forward Contracts (March 31, 2025) | Derivative Instrument | Notional Amount (in millions) | Gross Recognized Assets (in millions) | Gross Recognized Liabilities (in millions) | | :---------------------------- | :---------------------------- | :------------------------------------ | :--------------------------------------- | | Foreign currency forward contract | $899 | $899 | $(918) | Interest Rate Swaps (March 31, 2025) | Hedged Item | Notional Amount (in millions) | Gross Recognized Assets (in millions) | Gross Recognized Liabilities (in millions) | | :------------------ | :---------------------------- | :------------------------------------ | :--------------------------------------- | | January 2027 Notes | $900 | $9 | $0 | | March 2029 Notes | $1,000 | $5 | $0 | | July 2029 Notes | $850 | $20 | $0 | | March 2032 Notes | $1,000 | $21 | $0 | | Total | $3,750 | $55 | $0 | - Net realized gains on foreign currency forward contracts were $31 million in Q1 2025, compared to net realized losses of $15 million in Q1 2024[468] - Net unrealized losses on foreign currency forward contracts were $44 million in Q1 2025, compared to net unrealized gains of $30 million in Q1 2024[468] 7. Commitments and Contingencies Outlines the company's unfunded loan and equity commitments and potential contingent liabilities Unfunded Revolving and Delayed Draw Loan Commitments | Commitment Type | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :---------------------------------------------------------------------------- | :--------------------------- | :--------------------------- | | Total net unfunded revolving loan commitments | $1,799 | $1,724 | | Total net unfunded delayed draw loan commitments | $2,413 | $2,171 | | Total net unfunded revolving and delayed draw loan commitments | $4,212 | $3,895 | - As of March 31, 2025, the company had commitments to issue up to $463 million in letters of credit, with $53 million currently issued and outstanding[479] Unfunded Equity Investment Commitments | Commitment Type | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------------------------------------- | :--------------------------- | :--------------------------- | | Total equity commitments | $199 | $191 | | Less: funded equity commitments | $(39) | $(88) | | Total unfunded equity commitments | $160 | $103 | | Less: equity commitments substantially at discretion of the Company | $(43) | $(43) | | Total net unfunded equity commitments | $117 | $60 | 8. Fair Value of Financial Instruments Explains the methodologies and categorization of financial instruments measured at fair value - The company follows ASC 820-10, defining fair value as the price received in an orderly transaction between market participants, and categorizes inputs into Level 1 (quoted active markets), Level 2 (observable inputs in non-active markets), and Level 3 (unobservable and significant inputs)[483][487] Fair Value Measurements (March 31, 2025) | Category | Total (in millions) | Level 1 (in millions) | Level 2 (in millions) | Level 3 (in millions) | | :--------------------------------------------------------------------- | :------------------ | :-------------------- | :-------------------- | :-------------------- | | Cash and cash equivalents | $647 | $647 | $0 | $0 | | Restricted cash | $95 | $95 | $0 | $0 | | Investments not measured at net asset value | $27,115 | $17 | $713 | $26,385 | | Investments measured at net asset value | $15 | | | | | Unfunded revolving and delayed draw loan commitments | $(32) | $0 | $0 | $(32) | | Derivatives: Foreign currency forward contracts | $(19) | $0 | $(19) | $0 | | Derivatives: Interest rate swaps | $55 | $0 | $55 | $0 | Significant Unobservable Inputs for Level 3 Investments (March 31, 2025) | Asset Category | Fair Value (in millions) | Primary Valuation Techniques | Input | Estimated Range | Weighted Average (%) | | :---------------------------------- | :----------------------- | :--------------------------- | :-------------- | :---------------- | :------------------- | | First lien senior secured loans | $15,420 | Yield analysis | Market yield | 6.4% - 23.7% | 10.3 | | Second lien senior secured loans | $1,245 | Yield analysis | Market yield | 9.5% - 19.1% | 14.8 | | Subordinated certificates of the SDLP | $1,115 | Discounted cash flow analysis | Discount rate | 9.8% - 12.8% | 12.0 | | Senior subordinated loans | $1,354 | Yield analysis | Market yield | 8.1% - 21.9% | 13.2 | | Preferred equity | $2,711 | Yield analysis | Market yield | 7.0% - 21.6% | 13.5 | | Ivy Hill Asset Management, L.P. | $1,920 | Discounted cash flow analysis | Discount rate | 9.3% - 19.0% | 10.5 | | Other equity | $2,620 | EV market multiple analysis | EBITDA multiple | 5.5x - 76.2x | 23.4 | - Net unrealized appreciation on Level 3 investments was $403 million as of March 31, 2025[501] 9. Stockholders' Equity Details changes in common stock, equity offerings, and the stock repurchase program Common Stock Issuances (Q1 2025) | Issuances of Common Stock | Number of Shares (in millions) | Gross Proceeds (in millions) | Underwriting Fees/Offering Expenses (in millions) | Net Proceeds (in millions) | Average Offering Price Per Share | | :------------------------ | :----------------------------- | :--------------------------- | :------------------------------------------------ | :------------------------- | :------------------------------- | | "At the market" offerings | 17.2 | $388.6 | $4.4 | $384.2 | $22.55 | - As of March 31, 2025, $1.1 billion of common stock remained available for issuance under the equity distribution agreements[512] - The stock repurchase program authorizes up to $1.0 billion in repurchases, with $1.0 billion still available as of March 31, 2025. No repurchases were made in Q1 2025 or Q1 2024[517][518] 10. Earnings Per Share Presents the calculation of basic and diluted net increase in stockholders' equity per common share Basic and Diluted Net Increase in Stockholders' Equity Per Share | Indicator | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :---------------------------------------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net increase in stockholders' equity resulting from operations (in millions) | $241 | $449 | | Weighted average shares of common stock outstanding—basic and diluted | 676 | 591 | | Basic and diluted net increase in stockholders' equity resulting from operations per share | $0.36 | $0.76 | 11. Dividends and Distributions Summarizes dividends declared and payable, along with activity under the dividend reinvestment plan Dividends Declared and Payable | Date Declared | Record Date | Payment Date | Per Share Amount | Total Amount (in millions) | | :--------------- | :------------- | :------------- | :--------------- | :------------------------- | | February 5, 2025 | March 14, 2025 | March 31, 2025 | $0.48 | $328 | | February 7, 2024 | March 15, 2024 | March 29, 2024 | $0.48 | $291 | Dividend Reinvestment Plan Activity | Indicator | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 | | :------------------------ | :---------------------------------------- | :---------------------------------------- | | Shares issued (in millions) | 0.9 | 1.0 | | Average issue price per share | $22.16 | $20.82 | 12. Related Party Transactions Discloses transactions and reimbursements involving the company's investment adviser and affiliates - The company reimbursed its investment adviser or affiliates $2 million in Q1 2025 and $1 million in Q1 2024 for operational costs and expenses[522] - Ares Management Capital Markets LLC (AMCM), an affiliate, received $0.3 million in underwriting and advisory fees for co-managing the March 2032 Notes offering in Q1 2025[524] 13. Financial Highlights Provides key financial ratios and per-share data for performance analysis Financial Highlights (Per Share Data) | Per Share Data | As of and For the Three Months Ended March 31, 2025 | As of and For the Three Months Ended March 31, 2024 | | :-------------------------------------------------------- | :-------------------------------------------------- | :-------------------------------------------------- | | Net asset value at beginning of period | $19.89 | $19.24 | | Net increase in stockholders' equity resulting from operations | $0.41 | $0.77 | | Total distributions to stockholders | $(0.48) | $(0.48) | | Net asset value at end of period | $19.82 | $19.53 | | Per share market value at end of period | $22.16 | $20.82 | | Total return based on market value | 3.52% | 6.44% | | Total return based on net asset value | 2.06% | 4.00% | Ratios to Average Net Assets (Annualized) | Ratio | For the Three Months Ended March 31, 2025 (%) | For the Three Months Ended March 31, 2024 (%) | | :---------------------------------------------- | :-------------------------------------------- | :-------------------------------------------- | | Ratio of operating expenses to average net assets | 10.81 | 12.79 | | Ratio of net investment income to average net assets | 10.96 | 11.36 | | Portfolio turnover rate | 39 | 51 | 14. Segment Reporting Confirms the company operates as a single operating and reporting segment - The company operates as a single operating and reporting segment, with the Chief Operating Decision Maker (CODM) assessing performance and making decisions on a consolidated basis, primarily using net income[532] 15. Subsequent Events Reports significant events occurring after the balance sheet date, impacting financial position or operations - In April 2025, the Revolving Credit Facility was amended, increasing total commitment from $4,513 million to $5,283 million and extending the revolving period and maturity dates for most lenders[534][659][660] - From April 1 to April 24, 2025, the company made $492 million in new investment commitments (87% first lien senior secured loans, 92% floating rate) and funded $406 million[661] - During the same period, $394 million of investment commitments were exited (98% first lien senior secured loans, all floating rate), resulting in $1 million of net realized gains[662] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and liquidity, including an overview of investment activities, macroeconomic factors, and critical accounting estimates. It also includes forward-looking statements and risk factors Overview Provides an overview of Overview - Ares Capital Corporation is a specialty finance company regulated as a BDC and has elected RIC tax treatment, aiming for current income and capital appreciation through debt and equity investments[540][542][549] - Since its IPO (October 8, 2004) through March 31, 2025, exited investments yielded an asset-level realized gross internal rate of return of approximately 13%, with realized gains exceeding losses by $0.8 billion (excluding certain items)[544][545] - The company must invest at least 70% of total assets in 'qualifying assets' (e.g., private U.S. companies, cash, government securities) and can invest up to 30% in non-qualifying assets[548] Macroeconomic Environment Provides an overview of Macroeconomic Environment - Leveraged corporate credit markets showed positive returns in Q1 2025, supported by stable economic performance, labor market trends, and healthy debt capital markets[550] - Increased uncertainty from trade and economic policies has led to reduced expectations for future economic growth, higher inflation expectations, and greater capital markets volatility[550] Portfolio and Investment Activity Provides an overview of Portfolio and Investment Activity Investment Activity Summary | Indicator | For the Three Months Ended March 31, 2025 (in millions) | For the Three Months Ended March 31, 2024 (in millions) | | :------------------------------------------------ | :------------------------------------------------------ | :------------------------------------------------------ | | Total new investment commitments | $3,453 | $3,554 | | Investment commitments exited | $(2,857) | $(3,414) | | Net investment commitments | $596 | $140 | | Principal amount of investments funded | $2,805 | $2,959 | | Principal amount of investments sold or repaid | $2,562 | $2,914 | | Number of new investment commitments | 70 | 61 | | Average new investment commitment amount | $49 | $58 | | Weighted average term for new investment commitments (in months) | 70 | 75 | | Percentage of new investment commitments at floating rates | 90% | 97% | Investment Portfolio Composition (Fair Value) | Investment Type | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :----------------------------------- | :--------------------------- | :--------------------------- | | First lien senior secured loans | $15,901 | $15,179 | | Second lien senior secured loans | $1,532 | $1,847 | | Subordinated certificates of the SDLP | $1,115 | $1,192 | | Senior subordinated loans | $1,366 | $1,351 | | Preferred equity | $2,645 | $2,649 | | Ivy Hill Asset Management, L.P. | $1,920 | $1,915 | | Other equity | $2,651 | $2,587 | | Total | $27,130 | $26,720 | Investment Grade Distribution (Fair Value) | Investment Grade | March 31, 2025 (Fair Value in millions) | March 31, 2025 (% of Total) | December 31, 2024 (Fair Value in millions) | December 31, 2024 (% of Total) | | :----------------- | :-------------------------------------- | :-------------------------- | :----------------------------------------- | :----------------------------- | | Grade 4 | $5,071 | 18.7% | $4,792 | 17.9% | | Grade 3 | $21,305 | 78.5% | $21,156 | 79.2% | | Grade 2 | $499 | 1.9% | $513 | 1.9% | | Grade 1 | $255 | 0.9% | $259 | 1.0% | | Total | $27,130 | 100.0% | $26,720 | 100.0% | - The weighted average grade of the investment portfolio at fair value remained stable at 3.1 as of March 31, 2025, and December 31, 2024[563] Results of Operations Provides an overview of Results of Operations Investment Income Provides an overview of Investment Income Investment Income | Income Type | For the Three Months Ended March 31, 2025 (in millions) | For the Three Months Ended March 31, 2024 (in millions) | | :------------------------------ | :------------------------------------------------------ | :------------------------------------------------------ | | Interest income from investments | $526 | $513 | | Capital structuring service fees | $46 | $28 | | Dividend income | $143 | $147 | | Other income | $17 | $13 | | Total investment income | $732 | $701 | - Interest income from investments increased by $13 million (2.5%) in Q1 2025 compared to Q1 2024, driven by an increase in the average size of the portfolio[593] Average Portfolio Size and Yield | Indicator | For the Three Months Ended March 31, 2025 (in millions) | For the Three Months Ended March 31, 2024 (in millions) | | :-------------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | | Average size of portfolio | $26,576 | $22,737 | | Weighted average yield on portfolio | 10.2% | 11.4% | - Capital structuring service fees increased by $18 million (64.3%) in Q1 2025, primarily due to an increase in new investment commitments[594] Dividend Income Breakdown | Source of Dividend Income | For the Three Months Ended March 31, 2025 (in millions) | For the Three Months Ended March 31, 2024 (in millions) | | :------------------------------ | :------------------------------------------------------ | :------------------------------------------------------ | | Dividend income received from IHAM | $73 | $66 | | Recurring dividend income | $69 | $66 | | Non-recurring dividend income | $1 | $15 | | Total dividend income | $143 | $147 | Operating Expenses Provides an overview of Operating Expenses Operating Expenses | Expense Type | For the Three Months Ended March 31, 2025 (in millions) | For the Three Months Ended March 31, 2024 (in millions) | | :-------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | | Interest and credit facility fees | $186 | $159 | | Base management fee | $102 | $87 | | Income based fee | $85 | $88 | | Capital gains incentive fee | $(25) | $25 | | Administrative and other fees | $4 | $3 | | Other general and administrative | $8 | $7 | | Total expenses | $360 | $369 | - Interest and credit facility fees increased by $27 million (17.0%) in Q1 2025, primarily due to an increase in the average principal amount of outstanding debt[598][600] Average Outstanding Debt and Yield | Indicator | For the Three Months Ended March 31, 2025 (in millions) | For the Three Months Ended March 31, 2024 (in millions) | | :---------------------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | | Average outstanding debt | $14,174 | $11,865 | | Weighted average stated interest rate on outstanding debt | 4.9% | 4.9% | - The base management fee increased in Q1 2025 due to the increased average size of the portfolio, while the income-based fee decreased due to lower pre-incentive fee net investment income[601] - The capital gains incentive fee calculated under GAAP was a reduction of $25 million in Q1 2025, compared to an expense of $25 million in Q1 2024, primarily due to net losses on investments and foreign currency[602] Income Tax Expense, Including Excise Tax Provides an overview of Income Tax Expense, Including Excise Tax - The company accrued a net expense of $7 million for U.S. federal excise tax in Q1 2025, compared to $8 million in Q1 2024[608] - Net tax expense for consolidated taxable subsidiaries was $0 million in Q1 2025, compared to a net tax benefit of $(1) million in Q1 2024[609] Net Realized Gains/Losses Provides an overview of Net Realized Gains/Losses Net Realized Gains/Losses | Indicator | For the Three Months Ended March 31, 2025 (in millions) | For the Three Months Ended March 31, 2024 (in millions) | | :-------------------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | | Sales, repayments or exits of investments | $2,390 | $2,905 | | Gross realized gains | $46 | $42 | | Gross realized losses | $(138) | $(46) | | Total net realized losses on investments | $(92) | $(4) | - Net realized losses on investments increased significantly from $(4) million in Q1 2024 to $(92) million in Q1 2025, primarily driven by losses from Vobev, LLC and Vobev Holdings, LLC, and SVP-Singer Holdings Inc[610][611] - Net realized gains on foreign currency and other transactions were $31 million in Q1 2025, compared to net realized losses of $14 million in Q1 2024[611][612] - In Q1 2024, a realized loss of approximately $14 million was incurred from the full repayment of $403 million in 2024 Convertible Notes[613] Net Unrealized Gains/Losses Provides an overview of Net Unrealized Gains/Losses Net Unrealized Gains/Losses | Indicator | For the Three Months Ended March 31, 2025 (in millions) | For the Three Months Ended March 31, 2024 (in millions) | | :---------------------------------------------------------------------- | :------------------------------------------------------ | :------------------------------------------------------ | | Unrealized appreciation | $252 | $321 | | Unrealized depreciation | $(354) | $(207) | | Net unrealized depreciation reversed related to net realized gains or losses | $83 | $12 | | Total net unrealized (losses) gains on investments | $(19) | $126 | - Total net unrealized losses on investments were $(19) million in Q1 2025, a significant decrease from net unrealized gains of $126 million in Q1 2024[614] - Key contributors to net unrealized depreciation in Q1 2025 included Senior Direct Lending Program, LLC, Implus Footcare, LLC, and VPROP Operating, LLC and V SandCo, LLC[615] - Net unrealized losses on foreign currency and other transactions were $44 million in Q1 2025, compared to net unrealized gains of $30 million in Q1 2024[617] Financial Condition, Liquidity and Capital Resources Provides an overview of Financial Condition, Liquidity and Capital Resources Equity Capital Activities Provides an overview of Equity Capital Activities - Total equity market capitalization was $15.3 billion as of March 31, 2025, up from $14.7 billion as of December 31, 2024[622] Common Stock Issuances (Q1 2025) | Issuances of Common Stock | Number of Shares (in millions) | Gross Proceeds (in millions) | Underwriting Fees/Offering Expenses (in millions) | Net Proceeds (in millions) | Average Offering Price Per Share | | :------------------------ | :----------------------------- | :--------------------------- | :------------------------------------------------ | :------------------------- | :------------------------------- | | "At the market" offerings | 17.2 | $388.6 | $4.4 | $384.2 | $22.55 | - As of March 31, 2025, $1.1 billion of common stock remained available for issuance under the Equity Distribution Agreements[623] - The stock repurchase program has $1.0 billion available for repurchases as of March 31, 2025, with no shares repurchased in Q1 2025 or Q1 2024[627][628] Common Stock Price Range and Dividends | Quarter | Net Asset Value | High Sales Price | Low Sales Price | High Sales Price Premium (Discount) to NAV | Low Sales Price Premium (Discount) to NAV | Cash Dividend Per Share | | :----------------------- | :-------------- | :--------------- | :-------------- | :----------------------------------------- | :---------------------------------------- | :---------------------- | | Year ending Dec 31, 2025 | | | | | | | | First Quarter | $19.82 | $23.81 | $21.28 | 20.13% | 7.37% | $0.48 | | Year ended Dec 31, 2024 | | | | | | | | First Quarter | $19.53 | $20.82 | $19.94 | 6.61% | 2.10% | $0.48 | | Second Quarter | $19.61 | $21.58 | $20.24 | 10.05% | 3.21% | $0.48 | | Third Quarter | $19.77 | $21.28 | $19.80 | 7.64% | 0.15% | $0.48 | | Fourth Quarter | $19.89 | $22.27 | $20.74 | 11.97% | 4.27% | $0.48 | Debt Capital Activities Provides an overview of Debt Capital Activities Debt Obligations Summary | Debt Instrument | March 31, 2025 (in millions) | December 31, 2024 (in millions) | | :-------------------------- | :--------------------------- | :--------------------------- | | Revolving Credit Facility | $1,113 | $1,113 | | Revolving Funding Facility | $1,030 | $1,065 | | SMBC Funding Facility | $400 | $502 | | BNP Funding Facility | $785 | $889 | | April 2036 CLO Notes | $473 | $473 | | October 2036 CLO Secured Loans | $541 | $541 | | Unsecured Notes | $9,583 | $9,144 | | Total Carrying Value | $13,922 | $13,727 | - The ratio of total principal amount of outstanding debt to stockholders' equity was 1.02:1.00 as of March 31, 2025, slightly down from 1.03:1.00 as of December 31, 2024[640] - The Revolving Credit Facility had $1.1 billion outstanding as of March 31, 2025, with an applicable spread of 1.75% over SOFR (or alternate base rate)[641] - The Revolving Funding Facility had $1.0 billion outstanding as of March 31, 2025, with an interest rate based on SOFR or a base rate plus a 2.00% spread[642][643] - The SMBC Funding Facility had $400 million outstanding as of March 31, 2025, with an interest rate based on SOFR or a base rate plus a 2.00% spread[644] - The BNP Funding Facility had $785 million outstanding as of March 31, 2025, with an interest rate based on SOFR or a base rate plus a 1.90% margin during the reinvestment period[645] - The company completed the ADL CLO 1 Debt Securitization ($702 million) in May 2024 and the ADL CLO 4 Debt Securitization ($544 million) in November 2024, issuing secured notes and retaining subordinated notes[646][649] - In March 2025, the company repaid in full $600 million of March 2025 Notes upon maturity[653] Recent Developments Provides an overview of Recent Developments - In April 2025, the Revolving Credit Facility was amended, increasing the total commitment to $5,283 million and extending the revolving period and maturity dates for most lenders[659][660] - From April 1 to April 24, 2025, the company made $492 million in new investment commitments (87% first lien senior secured loans, 92% floating rate) and funded $406 million[661] - During the same period, $394 million of investment commitments were exited (98% first lien senior secured loans, all floating rate), resulting in $1 million of net realized gains[662] - As of April 24, 2025, the company had an investment backlog of approximately $2.6 billion, representing transactions likely to close[663] Critical Accounting Estimates Provides an overview of Critical Accounting Estimates - Investment transactions are recorded on the trade date, with realized gains/losses measured by the difference between net proceeds and amortized cost, and unrealized gains/losses reflecting changes in investment values[665] - Investments without readily available market quotations are valued at fair value by the Valuation Designee, subject to board oversight and input from independent third-party valuation providers (IVPs)[666][667] - Valuation techniques include enterprise value (EV) analysis (using EBITDA multiples or discounted cash flow) for equity and control debt investments, and yield analysis for non-credit impaired debt investments[673][676] - Fair value measurements are categorized into Level 1 (quoted active markets), Level 2 (observable inputs in non-active markets), and Level 3 (unobservable and significant inputs)[675] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to financial market risks, including investment valuation risk and interest rate risk, and how these risks are managed Investment Valuation Risk Provides an overview of Investment Valuation Risk - The fair value of most portfolio investments is determined by the investment adviser (valuation designee) with IVP input, leading to inherent uncertainty and potential fluctuations from period to period[679] - Illiquid nature and legal restrictions on resale of investments mean realized values could differ significantly from recorded fair values, especially in forced liquidation sales[679] Interest Rate Risk Provides an overview of Interest Rate Risk - The company's net investment income is sensitive to changes in interest rates due to funding investments with borrowings[680] - As of March 31, 2025, 69% of investments at fair value bore variable rates (including SDLP Certificates), 12% bore fixed rates, 11% were non-income producing, 1% on non-accrual, and 7% was the IHAM equity investment[683] - Excluding SDLP Certificates, 99% of variable rate investments contained interest rate floors. The Facilities and CLO Secured Loans bear variable rates without floors, while Unsecured Notes are fixed or swapped to floating[683] Annualized Impact on Net Income from Base Rate Changes (March 31, 2025) | Basis Point Change | Interest and Dividend Income (in millions) | Interest Expense (in millions) | Net Income (in millions) | | :----------------- | :--------------------------------------- | :----------------------------- | :----------------------- | | Up 300 | $564 | $213 | $351 | | Up 200 | $376 | $142 | $234 | | Up 100 | $188 | $71 | $117 | | Down 100 | $(189) | $(71) | $(118) | | Down 200 | $(375) | $(142) | $(233) | | Down 300 | $(555) | $(213) | $(342) | Item 4. Controls and Procedures This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting Evaluation of Disclosure Controls and Procedures Provides an overview of Evaluation of Disclosure Controls and Procedures - Management, with participation from the principal executive and financial officers, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2025, and concluded they were effective[689] Changes in Internal Control over Financial Reporting Provides an overview of Changes in Internal Control over Financial Reporting - There were no changes in internal control over financial reporting during the quarter ended March 31, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[690] Part II Item 1. Legal Proceedings The company and its affiliates are subject to various legal and regulatory proceedings in the ordinary course of business, incurring significant costs and expenses - The company and its affiliates are subject to legal proceedings, including those from investments, and extensive regulation, incurring significant costs and expenses[691][692] Item 1A. Risk Factors Refers readers to the comprehensive risk factors detailed in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, noting that additional unknown risks may also exist - Readers should carefully consider risk factors described in Part I, Item 1A of the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as additional unknown risks may also materially and adversely affect the business[693] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section confirms no unregistered sales of equity securities and provides updates on the dividend reinvestment plan and stock repurchase program Dividend Reinvestment Plan Provides an overview of Dividend Reinvestment Plan - The company did not purchase shares of its common stock in the open market to satisfy dividend reinvestment requests during the quarter ended March 31, 2025[695] Stock Repurchase Program Provides an overview of Stock Repurchase Program - The board of directors authorized an extension of the stock repurchase program to February 15, 2026, for up to $1.0 billion in aggregate repurchases[696] - No repurchases were made under the program during the quarter ended March 31, 2025, and $1.0 billion remains available for future repurchases[697] Item 3. Defaults Upon Senior Securities Not applicable - This item is not applicable to the current report[698] Item 4. Mine Safety Disclosures Not applicable - This item is not applicable to the current report[699] Item 5. Other Information This section confirms no Rule 10b5-1 trading plans were adopted or terminated by directors or executive officers during the quarter Rule 10b5-1 Trading Plans Provides an overview of Rule 10b5-1 Trading Plans - No Rule 10b5-1 trading plans were adopted or terminated by directors or executive officers during the fiscal quarter ended March 31, 2025[700] Item 6. Exhibits Lists all exhibits filed with the report, including articles of amendment, bylaws, supplemental indentures, equity distribution agreements, and certifications - The report includes exhibits such as Articles of Amendment and Restatement, Third Amended and Restated Bylaws, Second Supplemental Indenture for 5.800% Notes due 2032, and various Equity Distribution Agreements[702] - Certifications by the Chief Executive Officer and Chief Financial Officer pursuant to the Sarbanes-Oxley Act of 2002 are also filed as exhibits[702] Signatures Official signatures of the registrant's Chief Executive Officer, Chief Financial Officer and Treasurer, and Chief Accounting Officer, certifying the report - The report is signed by R. Kipp deVeer (Chief Executive Officer), Scott C. Lem (Chief Financial Officer and Treasurer), and Paul Cho (Chief Accounting Officer) on April 29, 2025[707]