ARCC - Earnings call transcript Q1 2019 | Ares Capital Corporation

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Operator

Good morning. Welcome to Ares Capital Corporation's First Quarter Ended March 31, 2019 Earnings Conference Call. At this time, all participants are in listen-only mode.

As a reminder, this conference is being recorded on Tuesday, April 30, 2019. I will now turn the conference over to Mr. Relations. Investor of Stilmar John

John Stilmar

Thank you, afternoon, and good everybody. Jake

from Company's listed and such important similar made no call in results believes, should, uncertainties. not during me forward-looking filings. actual those webcast, start such identified that course Many guarantee anticipates, Comments materially the any those some with statements expressed update forward-looking future contain forward-looking differ including statements Ares documents and conference The note is may Let of the also these risks can in as reminders. a of of will, use past for the statements any of expressions. accompanying expects, Please obligation to assumes subject such such forward-looking or could performance information intends, SEC are to and results. be and statements. Capital and reason, Corporation it's by this market words

the measures discuss Company believes method During this directly earnings performance investors A The most financial comparable and financial or EPS. it's conference from EPS in non-GAAP as core such Regulation GAAP Company per slide decrease measure per one call, by measure may for because; regarding share to core that accompanying the the certain SEC G, uses it's share the or useful presentation the core as results financial to reconciliation information provides Company be core defined of condition EPS operation. of increase net this resulting in found to stockholders' operations, call. can equity

morning Company's the Certain from including derived The relating representation discussed makes our no these of quarter accordingly warranties found of Company companies presentation by on not ended portfolio and earnings in the this this third-party in Capital on DeVeer, Form measures sources be information. Officer. respect first QX on March Company's at the Investor X-K. www.arescapitalcorp.com the be independently or has Ares Kipp verified, been presentation and XXXX link was Corporation's homepage reconciliation now information in In SEC also website. earnings to this release XX, earnings filed Resources the also with Company's presentation, Chief information addition, of the website the the Ares to on earnings turn can are website. clicking of on will found call 'XX Capital XX-Q the over Executive and Corporation's I available release section may

Kipp DeVeer

Thanks, Penny our Investor activity, our folks us. including Finance, and our in the the John. members Hello Roll; everyone and here Officer, of team, I results, call. with for other Chief the joining Investment Michael Financial and management will and Smith; Relations our Michael financial to Co-President, quarter and in detail investment several later thanks am through our in statistics teams. portfolio Penny first walk

for higher yields, driven increase over Let core our first Core reported results, level largely earnings conditions. benefited put me of XX% With income. before is portfolio increased the you were start will first also Michael. earnings increased year. can quarter fee well which I our from quarter as rotation and on recent we complete, Penny morning as ACAS $X.XX and in growth of results an market update interest initiatives last quarter. over recent This per related net our strong share, of balance income the portfolio them I and first by the our discussing to the very call turning financial sheet by context with briefly

$X.XX GAAP earnings quarterly higher of generated also per We share.

asset growth quarter we rising per both, GAAP per of and earnings core Our to net $X.XX with value in share. excess dividend and had our of well recently were of quarterly increased another share $XX.XX

thoughts to some the in transition on leverage market. rebound finance me the Let

existing rebounded and volatility continues to quickly XXXX of effects. volume rebound end the did transaction some at lower the new signature The has the across most has and be the the of things and fourth leave volatility supply the of assets flow. the reason have market transactions however, deal deals demand but Board cleared as significant quarter broadly improved, this M&A for market, for has turnaround tremendous the volatility Following slowed the after Several activity. large outstripped syndicated

existing been Secondary our impact invest have to continue prosper is to select scale. new seeing in able This our building. to spreads are and on is have due Capital origination broad this portfolio and interesting work what some of companies with prices our franchise loans businesses. and for traded on had company, still started opportunities. has actively large activity coverage, finally we largely size rebounded, tighten, while our market And believe Ares deal to We're has to

However, we as and selective a new deals, on highly need and to remain terms lead influenced be economics. engaged

new $X the with to of billion During we first quarter, incumbent those commitments made XX% borrowers. of commitments

credit growth. across crowded to evidence with and economic see investment evaluate competitors lack cycle, differentiation moderating We for some that the this, the The our investment lower-middle in better and a we're reward that in the middle landscape. in we With continue we of risk compete. entire market ability opinion to opportunities relative value alternative believe continue as real market see we to late remains quite

longstanding the created flexible incumbent companies, borrowers post-closing. support last strong and tested, our set, of market in volatility we cycle opportunity focus and market investments successful years opportunities approach our extend dry do adjustments and us broad stability approach We new one the balance of sources to reason the our provides to approach We look maturities to make to additional we us is investment and manage today. powder. from this and great proactively of very our downturn outperformance expand consistent continue review our to and substantial any investing. players. creates to liabilities; a remained and The our our utilize to simply for our it XX forward fact direct Similarly, a sheet consolidate more successful see likely and relationships finding has to some Our for provide share for no origination solutions days, enhances credit financing conservative of these deals, with proactive to is it it weaker reemerge during

advantage will and detail, financing efforts relief to As more of incremental renewed year set debt the another the These and provided $X.X base new a so are take of investing commitments billion by closed discuss of this capital commitments $X.X far in diverse regulatory support lending SPCAA. to we've over institutions. Penny across position of the billion financing

more like XX, call for ARCC reminder, a financial can I'd As XXXX. to X-to-X over detailed the review. exceed leverage ratio to Penny on a turn June the now

Penelope Roll

Kipp. Thanks,

share of quarter first the up for XXXX, to per earnings were $X.XX XXXX first core quarter fourth compared of the for $X.XX the XXXX. Our quarter and of for $X.XX

$XX net earnings realized This and share GAAP the GAAP were total, compares share first to the and of other Our per for of fourth share of In on $X.XX quarter including investments per XXXX gains unrealized on former per the gains transactions. $X.XX gains we've and the from reported net portfolio for net income $X.XX net other XXXX. of $XX unrealized quarter American of million portfolio. first $XX of judgment by payment depreciation to company transactions a on primarily gain net for related realized litigation the net a our quarter of million Capital portfolio were a offset receipt from XXXX million. result a of The

lower portfolio as on yield balance our amortized and Shifting of year during to also quarter. our investments on at XX.X% investment income increased We investments at XX.X% investment the on fair had million The weighted net our debt total XX, the yields the cost XXXX. our was at new to the value, respectively end and some average of exiting as XX, other as producing higher $XX.X of we ago. At securities gains transactions modestly realized December $X QX average originating the X.X%, on portfolio XX, X% during cost billion quarter. X% yield investments an a from March XXXX, from increase sheet, weighted yielding amortized and at was compared totaled that and QX yields of of recognized March from benefited slightly the

the $XX.XX hand increase. $XX.XX, at quarter our ago, X%. increased XXst net asset year ago our share the to per net Compared side X.X% stockholders a sheet; or to right $X.X was balance over versus in Moving a a a value of of share billion resulting March equity per

our As to compared at of March to XXst equity of was and net ratio X.XX debt times ratio $XXX of times XX, our December available cash times, debt XXXX. X.XX to X.XX equity was X.XX million respectively and

June, Act Availability long-term effective the becomes in begin us prudently we operating for towards higher mentioned, equity net our making Small debt expect moderately and with to a progress goal to Business of Kipp ratio. As Credit

post will year last X.XX reach quality levels. these range to the XX have June XX at will The speed laid months investment be with after out leverage it we we will depend times new range long-term multi-year target we June anticipate to targeted attractive Our to months investments. on the times. to this we take plan, opportunities Consistent and the of environment that source X.X which the reached

significant XXXX our position growth. for to far in So made we progress future sheet have balance

extended January; notes facility. not We credit During April of total facility facility liquidity confidence to XX, the in XXXX $X.X is each new closed and maturity. their in leverage can unsecured XX. the extension increased at close of X our date, capital group but have new billion that to and access the quarter-end, also $XXX the forma few only that for of extending X-year the capacity the billion $X.X benefit million convertible across and commitments bringing capital. renewed or the sufficient undrawn over and maturity our only notes dry million this To in range. the March then credit financing $X.X we and added upsize convertible March, also platform the shows Xst, quality available from our were closed number notes to revolving the first to $X.X to an X unsecured replacing Ares billion, into target bank in size of markets on our for to term The to upside, Ares X effectively of quarter, allow debt we committed was issued billion Company, other at and to our transactions we X lenders and on the of Pro which move Capital significant match. broader $XXX powder not banks to BDCs and but bank to repaid repaid Post with that from us ability facility that believe adding capital further total upsizes reflects we

dividend Also opportunities, $X.XX of we our XXXX. to Shifting quarter we of the can morning dividends share are As payable; such, share. investing will the we particularly, to well announced declared believe advantage leverage $X.XX per that our dividend paid operate be take positioned flexibility. a per of we greater previously to this we in as four additional the regular future $X.XX declared with quarter, we This per previously quarterly of of during share. declared second is pay dividends second additional second

to and to The for share regular per to income will estimate not from on stockholders currently be remains both that on the XX, our The file this turn our $X.XX well over as is now Michael XXXX tax quarter. XXXX. per until record XX, subject amounts additional year, the activities dividend, approximately I share. such walk $X.XX income investment or we return dividend these of second $XXX the through as taxable determination will We are spillover to quarter our as complete XXXX payable call later June final change. million June undistributed

Michael Smith

Thanks, Penny.

Goldstein performance. I investment and backlog like providing on and minutes activity quarter and few a a detail Mitch post would to activity portfolio quarter-end quick quarter, our I each As more I on will provide do then our pipeline. and first spend update

billion XX as of defensively quality team across with focus on transactions companies. During mentioned, our the a quarter $X originated positioned high commitments Kipp new

to flexible particular, array Our larger In this our and financing cycle. wide the with upper activity opportunistically sheet I a enables of companies and to to stage capital balance high in in moment. efforts quarter's scaled to origination us coupled solutions middle a team on reflects borrowers. this the in middle larger further at provide this quality touch invest our continue to companies, finance will market market

States. how sourcing scale highlight In using quarter, to and as transactions the context support buyers are in First, United we billion the part Evergreen of the billion the $X.X facility in market. the certainty market Athenahealth. of the Using was transaction. a acquisition named Coast public-to-private credit and mandate of were and advantages secured services healthcare lien our let awarded financing runner a were second capital some senior Athenahealth ambulatory $X.X ability in that with scaled commitment the revenue the to a electronic of the execution, management to the across provided lead provides Capital joint commitment to structure me on to deal; Ares take two health Veritas of cycle our recent secured and provided private and this this important transaction this tranches senior give book provide we particularly Capitals records

solutions. the ARCC during quarter a IntraPac IntraPac by manufacturer leading support packaging diversified of provide senior a Company. acquisition facility Additionally, secured set million is led of the strategic and a business capital recapitalization to the $XXX for the International for of rigid credit a and specialty designer

the transactions sponsor the of better solution certainty replace as XXX important grows start X.X% hold with this total $XX.X part capital us of the and the The to equipped portfolio along consisting only remains transaction, the of with borrowers. we winning sponsor portfolio. average with with number partner to as fair quarter-end individual strategic provide the bank additional to portfolio business of business. ARCC's group with on-cap The the sheet; at scale highly transaction. done relationship diversified was balance were have our mentioned, value the whom of and factors ability depth Penny Shifting of existing in billion the our of at position an capital execution all to with As a

million capital increased to ability earlier, up including the I over an driven reflecting, larger companies number EBITDA average solutions mentioned our increased compelling weighted few portfolio weighted provide borrowers $XXX to has which past of average Our to EBITDA as quarters. the

investments and discussed companies. interest larger making cycle have our We stage at the this in in

market is one end, to very making $XXX and this still clarification much EBITDA the middle investors quality documentation it million covenant companies weighted some of To lender However, so we to portfolio. a for our with we are that behind that point are out packages. worth average nuances wanted clear

provides supported of illustrate have may dollar EBITDA, squarely changes two you March credit companies large have the that our that average, on much commitments. average increased As have higher void added noticed in EBITDA was which that These at markets, our particularly we require invested opportunistically the opportunities quarter by companies the metrics strong middle that the XX, million. disclosure middle focus to market structural upper for we market. $XX focus to liquid high presentation, market ended and earnings in XXXX middle on in market borrower addition have to The in larger upper that the additional the core has the a weighted in end been yield have left continue

market. that only than XX% As high sizes high the an example, Today yield had of in yield less the of about market market high issuance $XXX million. of represents the yield segment XXXX of X%

these We for Shifting and in companies private get capital can due unique remained our to many go Given the in portfolio, our market. very nature been credit quality we feel sponsors stable. of terms transactions as attractive this we to protections of solutions base, strong on to lender well positioned capital the direct these have positioning. look

X.X% X.X% and first the down last and from of last of XXXX. first X.X% cost, X% no quarter, X.X% decreased also Non-accruals portfolio solid quarter as to at the growth during weighted had continue the non-accruals of EBITDA in amortized the fair past the during months. first companies first XXXX. non-accruals, percentage Company quarter over Our down quarter In in quarter, generate to portfolio the quarter, average quarter, decreased up the from from to total value new with XX X% a X.X% from

approximately on of activity. over the commitments totaling and let we on I Kipp, are commitments gains. investment of Before or post quarter-end brief made me generating exited realized XX, call provide April April to update a turn our to back $XXX million investment From repaid -- million and we're X million we $XXX investment net $XX new

and billion, and XXth, roughly April at backlog stood million our of pipeline respectively. $X.X As $XXX

a portion to these may some approval transactions Kipp to remarks. closing post-closing. documentation, investments turn is certainty that I'll investments now it note, these will for always, these of that and close. As there we Please sell back no are and subject

Kipp DeVeer

it In the the Availability we Michael. well results, Thanks, middle we're in navigating of team, us That benefit deliver for quarter shareholders. our long is of enhanced for our well, segment, billion Credit to forward. national balance happy our shifting enable the strong we Act. we're the from all capital tenure first attractive today. our market to the to positioned expanding one we believe what remarks with With Business $XX companies be direct to and very We'd a market continues largest in the prepared providers and and pleased closing, are We're footprint, Company sheet; Small moving believe provided conditions middle line the open concludes market our returns the finance seek healthy will flexibility questions.

Operator

will at [Operator Investor the address Instructions] to conclusion available team be Relations call. further today's The of any questions

question first Cyganovich from from go Citi. Please ahead. The comes Arren

Arren Cyganovich

and mentioned backlog from are slowed? slowed the you investment or look in seeing quarter had M&A continues the you general a strong. What M&A has very activity those where of you strong to investments, that are had bit, activity you the Kipp, yet market generating a your also and first in activity still -- kind

Kipp DeVeer

looking remains it a our transactions divided you I billion for it's to find that like portfolio lot about new $X the an driven backing of is of additional look, hard picked little to volume. enough Arren, to so like activity our people and benefit you're a back investments; mean, I as of I X, larger portfolio some all is And a the bit. know, existing huge mean it's also like news the deal we finance not you Yes, continuing investment things I by have companies, $X an other portfolio, something good them Athenahealth we to comment -- new sticks. the billion out half remember When we've -- that But mean in drive up from doing know, existing deal think definitely out building that, just new got XXX flow kind as point advantage. companies.

advantage the really it's existing portfolio. playing as off and size scale well So, the as

Arren Cyganovich

give AFFE an if updates some with from And process? could any to is there rule, then, I the from working your that was wondering update on the relief get you SEC

Kipp DeVeer

It's real in responded to something our year. that behalf. earlier from received the this comments continues to on for Obviously, filed SEC September last of we be relief was that we that effort the year application on some

just points, the and this forth it's but optimistic formal to is now. whereas think working dialog I So two we a back and I open and think going it clarification wasn't; a about The probably ago is trying can [ph]. year there for news provide lose are that other improvement with it and the obviously are to good to BDCs be SEC dialog, we that's response year an and we're so effort vibrant or in coordinated

Operator

O'Shea next question comes from The Wells Fargo. Finian with

Finian O'Shea

that of market forward markets of faster large middle a strategy; part be but move my deals comments the forgive larger can you do about this one talk back? goings with plays; of these your terms to book if company you of I'll how this would sustainable And versus core in may on opportunistic be come me, versus turnover Mitch liquid, kind feel would type start during dropped in your off feel with terms you phone core being the a and opportunistic?

Kipp DeVeer

to we response in sort yield remarks I seeing a -- of and with mentioned, that's opportunity shift interest time reverse subscale not there can we sort deals the in to that a is point these have and soon. privately market in going lot anytime where a we too. in market an prepared been of secular that Michael are think to jump of expectation in mean, particularly of think Michael deal, I high that think in start has as the indicate the I'll the that, a we're that sponsor I cyclical, getting done pursuing the happily don't tried not lack

pieces refinanced So, that's the part of into playing news good scaling emerge be market opportunity to is about the more last changer got your to the been that's cap continuing protection the of going see to capital larger presumably over getting point higher they've To able XX has so them; if around redeploy. years. on case, be hefty these of quickly, that may base investments a pretty returning call lot pretty an we're acceleration and

Finian O'Shea

it deals you kind then mechanics, overweights. the and tend Do but of the to BDC of or -- so? the lead second follow-on; you second that take about seen speak the and as your take more especially kind the recent some lead just more or to doesn't you the lien talk the And first where allocation can quarters, second of for first and split, of be lien that so where first these of for would these we've is deals to allocation choose

Kipp DeVeer

of each answer That's to there a of how firms approach mandate, And dictate fund got to not here, a single investment opportunity like we answer fits transactions but little if how to difficult is I'm policy sorry, obviously it I just we've -- person. affecting which that for many the each allocation our it's but see to to the an question simple other are sort -- secondly, to is that answer because that question don't there mandate different. the don't bit as that. want a all not difficult I is answer it know

Operator

The JP go Shane Morgan. next Rick ahead. with from Please question comes

Rick Shane

the of sitting in at taking and for my think these looking about all something context you questions Thanks companies. portfolio review, you morning. in Kipp, Hi, interesting said I will this it

any global not slowdown, delve companies a what a seeing what are slowdown. curious, you globally sectors? do to -- that's and material when it interest factors -- is You wage on, inflation, about of you is particular -- of some signs some signs of you talked that in there talked you I'm global citing; into going of slow something inflation, are a attributed what rates

Kipp DeVeer

of growth I for again lender think doesn't us I a a you're seeing a In -- it's of at cost you're moderating point but slowdown. moderating mean, bit some bit which other give think just growth. predominantly I so so inflation concern; a Yes, lack our little -- issue a definitely of mean, with seeing material an I it's Again, real of line; a business, side volume labor folks of your owners of portfolio categorize as kind like those to sort of companies. would more trucks, or more inflation, some of instance, inflation about everything shortage some in places, margin it things than to in food one I generally; little contribution available point or inflation, wage lenders hear growth drive top for to this companies. you companies for on cost for it's the

modest still we definitely but we're a pretty So, positive we're seeing sit slowdown. on where

Rick Shane

can to that; to terms on with anything in mind it's this originators willing point? as a to team you're might in that of communicate follow-up you of what there is want raise at you bar the that And a your that management it. Got to lend places

Kipp DeVeer

has us time say the walked just that create you, that to think we're high. today. been we while certainly produce stay we the would little is we've for easiest mean, to to I this retail industries the we're all. much Yes. cycle, where we've media benchmark, things and made like of is so tend industries do pretty tend that our and be historically key breakdowns don't more a the the the got we of some invest bar we is to and is much I high deals pretty been discretionary in way so a out if cautious, to time of most the for the through and it where last extremely to that's I this have some go still with We the we people to can defaults, mean, away and go been and investor and from, underexposed late can industry spend -- probably that once emphasize places other away in Rick meeting, is make most the the quickly the competition more mistakes. mistakes; think of bar most

the and first, investing and defensive can, that So trying pick to we're participant orient that the lay for we first best of things understanding structures really all best occupancy need course, in too. we the the to the place And companies deals to market compete industries. while then in best the and

Operator

The Please Hecht next question comes with from Jefferies. go ahead. Doug

John Hecht

your First this progresses guys I played the curve. yields given rate the benchmark, of good question expect to have we background? Maybe as be, of your course a guess of first trajectory year what very yields you now question, I just has a -- had flat out; would should cycle looking think margins we're at kind the and your as the

Michael Smith

don't know and XX% others, an interest strategist I I'm I'm I year. to see question but obviously, about this -- said for surprised rate the outlook rate cut of appreciate -- this I it. just don't not kind I

guess do probably of just too, a I be maintenance of think sort kind would LIBOR is today. moderate, my increases where expect we I know of

is floating. on us fixed lending both the a financing of and know, for side curve asset actually most flat environment because kind So of have we're plus [ph] and part cost, mix for go-to-watch as of the we LIBOR you

in issuing or us. unsecured keep X-year off or in great can lower convert we the markets markets benchmark even for X-year that's So the

a would at of and net state that's of as think I is, margin our sort yield if stays interest see kind we curve it the Company So steady the expectation.

John Hecht

the out, think should we looks just the And some and that? deals at gone some like term disclosure. has then It is the the the that second term question, term months? is just Is function a of commitment how of average being about loan weighted new looking -- or that this larger just about

Penelope Roll

of a are how we forward. matter It's rolling really our maturities just

look if maturity. the instrument new at So extended and we just you liability debt then X-year X-year which and issued side, debt converts paid the a off

line revolving extended credit April our In year; maturity of addition the well. out a we to also on as so that, would the that X, larger maturity of extend by

John Hecht

You there?

Penelope Roll

Yes.

Kipp DeVeer

something just trying the borrowing got in sure Sorry. to for you. we've We're make answer here full

John Hecht

looking Yes, actually I anything. the more was than commitment at terms

Kipp DeVeer

on John? seeing the side, asset You're

John Hecht

on It Yes, looked average months? went side. asset the to like term the XX

Kipp DeVeer

standard honest, thing. mean, of a that. investing just none changed, notice of really to so be I mixed it's have the be our To didn't terms going I

Penelope Roll

it It's size that we of a a sometimes the holding depending for bit duration. on little the a weighted we're skew also certain average, so deal will

Kipp DeVeer

can an come a look at back you there is. don't but see I We'll answer if is it, We that's actually think John. take just to it material, and offline

Operator

The Alexander Point. go next question with from Compass comes Please ahead. Casey

Casey Alexander

repayments Given subsequent it in reasonable right your more of second have as origination modest to of the growth the already the and at that be couple now? least at portfolio would taken at quarters; looking the expect place, somewhat in robust you're last activities it quarter amount looking

Kipp DeVeer

you we were I of up out, laid where for a pipeline, backlog add Michael below think, sort we've pretty the QX. we we're got that when -- but would significant suggest and backlog it

Casey Alexander

off dollar explain wondering that and makes it of is? up the inclusion just there cash -- matched on I've the I I'm liability; there and never before. dollar, a Secondly, corresponding operating asset what balance for that seen kind of for the an sheet difference? noticed lease They're was can because not you transaction

Penelope Roll

with to Corp have This was new a leases pronouncement liabilities is we Ares connection to that related that in there thing, that adopt an is GAAP had any purely in. we accounting Capital

because be liability greater for difference the had right value use gross of would some to of sorry, those already While we asset owns, a leases The disclosure the and our the that we that does up what leases corresponding the two, a between on couple still a for this normally in why same purchase and payments have Ares than on operating you accounting that ACAS ago, an ARCC the actually have is we is for, liability. sheet most there of but basically balance with that's the of Capital assumed a books future of from asset. present -- reason we gives net a years gives American this subleased liability

Casey Alexander

this NAV, -- the quarter a it as? in calculate off that's what it difference Penny, place took that transaction the did was knock So, $X.XX I of share actually

Penelope Roll

-- is the in is the that No, The ages difference $X.XX was and sheet and between accounting sheet, ACAS because at the you look asset purchase lease balance ago. liability $X.XX balance the the lease from $X.XX. if already operating $X.XX

to so liability So for we booked, adopted is impact. It's want you no entry new gross-up. and pronouncement; just if when $X.XX the balance P&L accounting, there $X.XX this was a a [indiscernible] sheet get we booked an into for asset we

Operator

Raymond comes from question next go ahead. Dodd The Please Robert with James.

Robert Dodd

trends. recent the yields like the was of kind tends -- mean, obviously to be back in cost, advertise I it going last funded it quarter to Just quarter. nine

where as correct got well, tiny your imply can on a up if can risk up So was would grew or weighted any a up LIBOR quarter the me, portfolio on yields give a basis still were the pretty Obviously weighted the -- a was XX, quarter, basis you average. -- average bit view. quarter SDLP average may you average from weighted I've rising to simplify just funded, more bit, I to in where that they're points. were more and tend XXX the but up average simplistic us XX, if rising not Sequentially, to indicate a EBITDA points, grossly a -- be this yield EBITDA and seems I basis, in borrower, deployed went

maintaining credit view. talk you're so a you while late us average borrower how a that that much can cycle little bit yield popped So and is about up the through rising

Michael Smith

Sure, we're sequentially XX.X not from perspective. obviously, out I up on quarter but there we spreads over my going think fourth XX.X; lot equity think think that's the QX I early the in particularly a of on bit that much a stuff just investing. into to thanks looking XXXX probably I if QX is producing do a from to whole for little the the carried the our end at backs so that income from we're case. that widening securities, i.e. that's don't there don't are question. I modest changed QX mean,

Kipp DeVeer

increase to risk more We're and into underwriting of the We're definitely this not opposite. yields the doing actually put trying part. process

of So, the a my bit flowing just it's little quarter. is, through math guess

Operator

from Mark with question go Hughes ahead. Instructions] Please [Operator next SunTrust. The comes

Unidentified Analyst

[ph] for Thanks Michael Mark. is This afternoon. Good our for taking Ramirez question.

significantly as your to rebounded than have pace industry while leveraged We the seeing fund per down consistently at last new comments, market are managed finance So year-over-year. loan has volumes a we originations leverage greater year.

our you the these at a covenants -- guess selective? look guys majority Thank remain changed to I a So, of investments? causing just deals is are new and the I you. quick question marketplace seen a -- or And in sort guess does higher additionally, has deals follow-up of as rate your scale to for size

Kipp DeVeer

your to half slower earlier even that did were a existing of is, was what in one just we a or billion to of question. Sure. Look, I'll Thanks the investments comments companies. I origination About of pretty so market. made $X quarter, revert significant for back made it which portfolio

that quality allows the to continue market really we capital us companies the us busy regardless activity of obviously that's looking what to in back for So allows portfolio. stay think high to more something and they're are that

makes so or say, even is very for just hard very slow $X market management The a that something work We get difficult particularly, along risk is Athenahealth, new everybody and lead we team of is good us. not covenants the for billion to fight out size sense and negotiating Look, not think other there fighting haul agreements our documentation that are long other with for like deals, which a in the to we large participate in that we going in as deal, with believe us large that of real front the to a deals Driving that have on when investment the originations advantage ability the to billion of front. we we billion else the an in it's forward. think the about the be at field.

there over the I many couple you'd our in of last that bit change -- allows like think deteriorated or sense a us a from new docs others to last think get when material think covenants makes us markets for in to I but on taking assets. hear our from quarter, is So, position point in a we years and

Operator

question. more one for time have We

So, ahead. Markets. with Capital go Please Chan BMO Lana

Unidentified Analyst

afternoon, of one behalf I credit just Lana on I'm have Chan. Good DeGrasse environment. question on Christian [ph] the

cracks slowing a to Are seeing addition any out there In economic growth. regarding credit? you

Kipp DeVeer

look that at if get the the is think there, you answer metrics would I you that no.

be it's If the roll the index you think look at more the rate to broadly terms the syndicated low about market, markets and Clear default and it low. five-year Channel out at than in five-year is of and I index, of at will in the

tried it broadly at marked the are is, there where for been would syndicated in do way markets we sit, the to no very I and to X.X% performing you credit and on down. non-accrual or So little be the have that that telling that things to communicate aren't markets is stress our a companies non-accruals that non-accruals folks have generally while cost around gotten think,

any we We migration have non-accruals. haven't new negative this quarter, seen i.e., no

we're I think So, cycle. later in the

laid you. the in don't we're think portfolio, an probably increase list see vigilant to might just obviously we've risk keeping in watch about out as I we a defaults we stat longer be for but management, the than

Operator

remarks. to concludes like DeVeer any Mr. over Kipp closing I'd session. to This back for question-and-answer conference turn our the

Kipp DeVeer

day. the No, I Appreciate all great set. have We'll think you questions sign hope off. a and we're all

Operator

Ladies and gentlemen, for this concludes today. our conference

any of at conference If May and be Time the call XXXX, through part archived approximately to dialing international end call, one of an to callers X the of callers domestic +X-XXX-XXX-XXXX. today's by dialing replay this missed Eastern after by will P.M. available you XXX-XXX-XXXX, hour XX,

of conference for has you Resources all XXXXXXXX. a Thank attending Investor concluded. An of Ares reference webcast replays, link also section the the homepage located Capital's please The website. be replay will presentation. archived For available number on on now conference today's

disconnect. now may You

Ares Capital (ARCC) 30 Apr 192019 Q1 Earnings call transcript