Ares Capital closed on a definitive agreement under which it purchased the remaining loans of the Senior Secured Loan Fund (the SSLP), effectively concluding the joint venture with GE.
Under the terms of the agreement, Ares purchased the remaining $1.6 billion portfolio of first lien senior secured loans outstanding at par plus accrued and unpaid interest and fees from the SSLP. Following the completion of the loan sale, the SSLP made a final distribution of $1.7 billion to the SSLP subordinated certificates, of which Ares Capital received approximately $1.5 billion. Over the life of its investment in the SSLP, Ares Capital generated a gross IRR of 20%.
As a result of this agreement, Ares Capital increased its investment in first lien senior secured loans by $1.6 billion, yielding approximately 7.1% in the aggregate, and exited the remaining $1.5 billion of SSLP subordinated certificates, which were yielding approximately 5.75% at closing.
“We are pleased to have reached an agreement with the SSLP that will successfully wind-down the joint venture in an expedited and beneficial manner for our shareholders,” said Kipp deVeer, CEO of Ares Capital. “In addition to receiving an immediate boost to our portfolio yield, this transaction significantly increases the capacity under our 30% basket, allowing us to gradually expand our investment mix into higher earning strategic investments.”
Since the entry into the joint venture between Ares Capital and GE in 2009, the SSLP committed more than $20 billion in senior secured loans. In August 2015, GE completed the sale of its U.S. Sponsor Finance business, through which GE had participated with Ares Capital in the SSLP. Since June 30, 2015, the SSLP has been in the process of winding down and has not made any investments related to new portfolio companies.
Ares Capital is a specialty finance company that provides one-stop debt and equity financing solutions to U.S. middle market companies, venture capital-backed businesses and power generation projects via senior secured loans, mezzanine debt and equity investments.