On September 8, Ares Capital (NASDAQ:ARCC) priced $750 million of unsecured notes paying 6.250% and maturing on September 15, 2033. The deal closed on September 15, and the cash will pay down bank borrowings the company can tap again later. That sounds like routine housekeeping. But the coupon sits above what Ares Capital paid on notes it sold in May 2026, and its latest quarterly numbers softened. The fine print deserves a look.
Plenty Of Runway
The case for calm starts with timing. Money that stays put until September 15, 2033 outlasts every maturity date on the company’s main credit facility, the latest being May 21, 2031 after an amendment that May. Chief Financial Officer Scott Lem said Ares Capital finished the June quarter with about $6.0 billion of available liquidity and no big maturities looming. In effect, the company is swapping shorter-dated bank borrowing for a longer commitment from bond investors, which buys breathing room.
Earnings cover the bills, too. Net investment income was $0.50 per share in the quarter ended June 30, 2026, enough to fund the $0.48 dividend announced July 29, which is payable on September 30 to holders of record on September 15. The portfolio’s debt and income-producing holdings earn 10.3% at amortized cost, well above the new coupon, so the borrowing still leaves a wide margin. CEO Kort Schnabel also points to 17 years without a cut to the regular quarterly payout.
Cracks Under The Surface
Now the price. The May 2026 notes, which mature on January 15, 2030, carry 5.550%, so the new debt costs more. A longer maturity explains part of that gap, but a higher rate is still a higher rate. And the proceeds are not funding new lending. They repay borrowings, while in the second quarter of 2026 exits of $2.9 billion outran new commitments of $2.6 billion. Schnabel described a slower deal environment.
Then there is the quality of results. GAAP net income per share fell to $0.24 from $0.52 in the second quarter of 2025, as $183 million of net unrealized losses hit the books. Net asset value per share slipped to $19.35 on June 30 from $19.94 on December 31, 2025, so each share now backs less of the portfolio. Core EPS of $0.47 also fell short of the $0.48 dividend. And loans on non-accrual status rose to 2.4% of investments at amortized cost from 1.8%.
Short Sellers Are Watching
26 hedge funds held Ares Capital, the other ticker tagged on this news, down from 28 a quarter earlier, which shows slight trimming. Some 5.77% of its float is sold short, which is heavy skepticism, though part of it may be hedging. The P/E of 10.15, as of September 18, means the stock is priced for an income-oriented, steady-yield profile rather than explosive capital gains, so a stumble would be felt. Falling fund interest and heavy short interest against a moderate valuation create a cautious setup.
Cost Versus Cushion
This deal is less about growth than about buying time, and the bill for that time is worth a close look. The runway looks long, but the results underneath it are softer than a steady dividend suggests. What settles it is credit. Contained problem loans make the coupon a small toll against what the portfolio earns, while a sliding book value and climbing non-accruals would turn one soft quarter into a pattern.
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