ARCC - Earnings call transcript Q1 2020 | Ares Capital Corporation

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Operator

Good afternoon. Welcome to Ares Capital Corporation's First Quarter March 31, 2020, Earnings Conference Call. At this time all participants are in a listen-only mode.

As a reminder, this conference call is being recorded on Tuesday, May 5, 2020. [Operator Instructions].

the to turn now will call Mr. over I Investor Stilmar, Managing of Director John Relations.

John Stilmar

you. Thank

with Comments relative on the our Let course important the market subject me some start volatility uncertainties and reminders. base forward-looking and conference companies. including portfolio rates and to significant risks contain of of call and made in webcast our documents and COVID-XX business accompanying impact statements are changes this the during and

update use statements and in can differ such past guarantee be The of statements Many of of the intends, information those filings. may in for a Capital SEC performance words those such is anticipates, by reason, Please should, not results. its Company's listed these similar expects, believes, including expressed also note forward-looking materially from could forward-looking or as such identified expressions. statements. forward-looking actual obligation market will, that results such Corporation any to future Ares assumes no

the one call, EPS. The results certain such EPS per uses of because regarding core or conference the SEC to non-GAAP share and information measure as believes condition company is core financial this that G, financial useful by defined company it provides company core Regulation During method investors as the earnings measures discuss a to performance may its operations.

financial in A presentation reconciliation GAAP of be the resulting can equity stockholders’ decrease operations, this share to from most for net or core accompanying comparable measure EPS found increase call. the directly per slide in

the these filed earnings SEC of Form also our X-K. release In found morning measures be may addition, with in on this reconciliation

presentation, verified, or third-party and companies the makes and this has respect information. in not representation information including discussed portfolio from independently relating sources in this no was accordingly, company of been warranty derived information to Certain

of on Ares website. Resources XXXX, Presentation earnings homepage XX, Capital March on link release and ended www.arescapitalcorp.com the clicking the by also Investor on section. available website be quarter found presentation company's earnings QX first the company's XXXX XX-Q are the the company's can at The Earnings Corporation's on

to Ares Capital Corporation's call now to would the Mr. like over I turn Chief Officer. Executive Kipp deVeer,

Kipp deVeer

you John. to joining for and Thanks, everyone, Hello thank us.

on Roll; Financial other our the by several Goldstein members our Penni management line Officer, joined Co-President, and Michael and Chief team. of Smith; I'm the Mitch

fortunate safe We virus very our want are COVID-XX recognizing to and by working navigated wishes those thoughts have who time our to most send this frontlines, in and us We're affected and for and by folks employees our get extraordinary disruption start our times. And allowing pandemic, the we've healthy. are country significant without who these the experiencing on challenging from particularly a to the the suffered that to operations. successfully environment by trying remote those in we day-to-day transition best the

given will We which the This thoughts the to now for core market share, current per earnings in quarter disruptions. results $X.XX conditions. and we quarter in market company's result Ares first on economic provide Capital provide a of the Corporation light some on highlights the dig is first current strong of reported morning, position then and

more not to COVID-XX companies detail across varying portfolio been consequences will pandemic. degrees economic our later, we in businesses impacted consequences to by As U.S. discuss are the of the this of the and have most immune

our industries as business upper defensive in from market franchise in and operating services. we're that believe middle do a healthcare portfolio services, well-positioned of diversified is we larger highly position software, However, relative like strength and businesses

sectors the to underweight such as hospitality, retail. energy, Furthermore, most travel, and we restaurants, impacted remain

of private and Our bridge as each the sponsors to set equity management company's We're finding to recovery restart. a benefits. sponsor recent each different portfolio when focus close significant relationship company have can and working time we our the equity their our been a does needs, determine has often liquidity to each has private manage circumstances economy on with companies, our plans and that with and operating working through company to teams,

in one experienced difficult investment is our of these that times and One the we most have deepest key benefit the teams managing business. in portfolio in

We than portfolio mind Capital XX on XXX in professionals management not that professionals. have Keep more including originations. Ares investment professionals, does focused investment have dedicated solely

risk in All the professionals of activities. investment aspects of our are management involved underwriting investing our and

roles this, and to During and experience on active The be put and and in to all size significant investment resources allow risk into of us allows to periods bear these bring the of team's this us like portfolio. our professionals early, thorough capabilities very breadth markets. our management volatile

we know, of workout difficult a track selected economic you situations borrowers. with environments, success of many through including long significant record As have managing

to to we well-positioned relative long-dated we portfolio our has addition our markets. We with us believe way have working with sheet are financing believe In to unsecured, due the fortifying with navigate the that companies, funding significant balance very of liabilities. that strength operating constructed volatile and philosophy we

maturities are XXXX. no this well less total XXXX our XX% are case, of And debt Our debt in maturities than current laddered, outstanding. maturities in total

position significantly have our unsecured the of to to to available of $X.X regard unfunded Today commitments billion. facilities. and of than gives term deep predominantly believe which revolver companies important $X.X collateralized two With to our be these our which nature invest support full secured credit and liquidity in approximately the aggregate this to over facilities, our liquidity, delay we is portfolio recovery. capital enabling access loan will us more times We we're due structure, draw billion us

dividend for quarter share Given second the strong position, quarterly a per we of XXXX. the declared cash $X.XX

recovery, in cautious foreseeable confident slow the level continue support we're outlook we we can to for uneven as a steady a for dividend and a that future. possible Even factor

a investing times, we're we As opportunities while high invest. seeing capital to look there is these ahead, during uncertain increasingly new for attractive bar

terms and on will leverage documentation making and portfolio [indiscernible] have existing spreads and focus investments improved have investment in in materially. Our be new widened, companies Investment companies. select

which investment attractive view Our net in asset own stock, well below trading value. our of opportunities investing is includes

declared return repurchased quarter, During the using first our of price stock the XX% implying at million most average of an we dividend. annualized a per recently share $XX.XX $XXX

Given of balance sheet, at acquiring to our the consider our and strength attractive we'll levels. stock liquidity continue

it Before I situation. me need not foresee you issue dilutive with additional do to to Penni, We the over equity one to let current any reassure thought. turn due the capital

now Penni I'll first to our to results. over more it turn details on provide quarter

Penni Roll

Thank you, good and afternoon. Kipp,

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

net the XXXX fourth share of share of $X.XX XXXX. for and per the for quarter of of We quarter first for first had which $X.XX $X.XX loss GAAP of a XXXX the per to net GAAP compares quarter income

COVID-XX net includes gains net share of unrealized losses share reflect GAAP loss per losses of net XX% portfolio, the $X.XX fair the per value. assets of and of $X.XX our per Our and the value net the of X% driven macro XXXX on of of of first net economic quarter unrealized fair widening value total spreads credit impact largely share. for of at asset and realized $X.XX by These represented approximately

end at fair was at of billion. $XX.X value quarter portfolio the the total Our

amortized XXXX, XX, XX, cost and on X.X% at debt average X.X% and the amortized March at income of was our securities total yield producing other as As respectively average the at XXXX. yield compared cost investments December weighted X.X% was on X.X% and to weighted

investments the total quarter LIBOR. XX% down March on yield quarter further due rate declines at largely total fourth XX, of amortized At was in to first cost XXXX, floating our from was in The portfolio investments.

three had rate our certificates, which of investments in an average LIBOR floating months the remaining XX% the today's Additionally, of current approximately X.X%, above rate. SDLP investment LIBOR floor excluding is

right sheet, to Moving and position. side we've the to extending the of liabilities hand balance our be liquidity our building continued active

more $X.X favorable. note $XXX the ARCC's million This the timing the billion cost led quarter, borrowing note capacity execution demonstrates in was During to we history by with unsecured execute five-year than are markets a BDC lowest our the of issuance unsecured X.XX% by first raise expanded issuance, ability when and coupon. a

committed XXXX this billion final secured on of a borrowing In added facilities. our capacity $X transaction, $XXX and of total we addition million of the successful to maturity to extended incremental credit bank

result, more the us borrowing believe cash existing quarter to a liquidity these and for As available billion we and of environment. have available which improving commitments positions $X.X investing capitalize on ended sufficient the loan with we than unfunded to approximately capacity,

addition, sales, and In repayments Hill Ivy we through including investment have through embedded our of from existing portfolio sales to Management. loans liquidity Asset

we term advantage for maturity facilities With a the us meaningful no liquidity strength structure bank in place, the and of credit in believe XXXX, debt available our maturing today's in competitive XXXX, of environment. distinct until represents January our earliest capital

notes At by of which important and our of a quarter having unsecured our our unsecured XX% are in in from debt borrowings being unsecured balanced sources. and supported end, three of the is over An assets equity. strength capitalization mix quarters secured resulted of component funding

for structure than fully the approach further which if This commitments there our at had borrowing capacity even portfolio. well the us credit to to provides to we lines access support required the be secured if these credit more under choose, to total facilities, the significant available, our positions this capital facilities. To depreciation a assets quarter-end, demonstrate doubled overcollateralization maintaining largely unsecured of were in

the billion March in our asset Now net value $X.X was shareholders mentioned or was losses net that $XX.XX in year-end per to value first our resulting we driven net at decline let's per shift earlier. the XX, in of equity. unrealized XXXX share quarter primarily by XXXX, $X.X XXXX. At a versus discussing recognized asset our that equity I of billion stockholders $XX.XX share, The

during per $X.XX activity by benefited from stock NAV our quarter. our the repurchase accretive However, share

$XXX $XXX have authorization. our we remaining today, stock of As repurchase million of million

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

first to equity the times quarter range net the previously towards increased target of investment and of debt-to-equity growth end unrealized our losses at X.X shareholders to ended quarter-end. to We due stated net the of higher XXXX X.XX

Depending upcoming range. shareholders on quarters, high-end did of see increase fair the the level growth ratio investment GAAP of in from any changes and target impacts to debt-to-equity above temporarily further value net leverage our our equity net

strong our leverage range, bank cushion position, regulatory covenants. feel the our comfortable liquidity high-end and we of still the above operating Given to would a provide temporarily significant which

was share We our XXXX. conclude, $XXX income undistributed discuss Before taxable estimate income the currently million dividends. $X.XX I that spillover of or at end want and per to I our our

strong many spillover supports said a conditions. maintaining we believe undistributed in we've through market varying times dividend meaningful of steady goal past, having the As a our and

quarter. per XXXX, mentioned, on stockholders XXXX. regular in a this the quarterly quarter of paid $X.XX which XX, regular consistent share, payable dividend second Kipp XX, cash quarter first June As is of June dividend record morning dividend second we This with declared the is on

activities investment our Now our more will discuss and I the Mitch call over to portfolio turn in to detail.

Mitch Goldstein

Thanks, Penni.

Mike upon portfolio investment spend more and do As and I to first this I like activity at point, detail tend some performance minutes then on and hit providing would Smith few quarter to quarter-end post activity. a our

During these and XX% March X. transactions, secured, the these incumbent new team of investment Most to closed first our $X.X originated billion were these commitments XX% new commitments of of prior across senior XX were borrowers. quarter, of transactions to transactions

liquidity minimal to delay and fundings commitments in is acquisition. point with expect funded It the of these of delayed million M&A of term loans. continued also market modest put support to as net during revolver we commitments place the borrower We $XXX funding through activity, generally portfolio existing borrowings out of were our our to the companies in support quarter needs draw important

and DDTL seen of to Since of commitments those our quarter-end, levels. of were we As XX, drawn material commitments XX% revolver not drawn. were any changes March have XX% our

accelerated which over X% impact EBITDA a the strong growth demonstrated compared months of XX X% brought to our them this as the approximately environment of last position. quarter, to into Prior portfolio C-XX, reported prior in companies

we since in needs. portfolio However, have with evaluate their our frequent to the outbreak and their to dialogue be determine C-XX, of the companies earnings liquidity power had

shutdown. expected certain companies As in with the associated experiencing our challenges are portfolio

This lender. drive downside we outcomes. always protection agent begins control be us our approach with the that to deals the fact and our the to on allows seek better largest to and discussions the Our

of required to controlled XX% private tighten by and as equity equity, XX% re-price been our using portfolio Where the these required companies Our to resources senior loan of businesses. our us, additional additional we've firms secured any that and support portfolio we amendments an secure support are have from documentation, opportunity is risk. believe

long-term the we for that of value believe our is Given our portfolio, paramount companies. view our of liquidity

position and are the to Kipp described, As liquidity Penni borrowers. at significant we in support our of enviable ARCC having

our to it enable to other co-investment the our access provide along view borrowers this for to Additionally, as the funds as capital. potential relief positive Ares portfolio sign will provides even recent managed a additional with SEC's capital greater We ARCC. support

While a for our portfolio times. taken the impact believe portfolio of our some is well-positioned of companies, toll C-XX has on turbulent we these

During new value the first non-accrual status for in the payments basis companies rate XXXX, the quarter to quarter, respectively added of were X.X% were cost XX% X.X% and collected. and X.X% first respectively on March to interest quarter XXXX. XX, fair and contractual X.X% the of bringing and year-end non-accrual increased the at from as a Three

commitments, our repaid Before to $XXX From in commitments through I we quarter-end made exited new were turn the investment of Kipp, resulting net million. million provide loss update of $XXX $XXX call a activity. investment were million XXXX, investment post April million back and funded or on realized on over $X which me of April we let totaling a X brief XX,

The funded was and securities during amortized yield period at average And income producing XX.X% and period producing repaid weighted the average or amortized yield the securities X% cost. of at income during cost. of this was weighted exited debt debt

April and focused $XXX that portion and and senior may than investments existing documentation post-closing. companies. respectively million investments a million are and approvals these more backlog may bent we XX, a our contains on not of to and close XX% at of towards our loans subject heavy of pipelines or portfolio As that roughly sell Note $XXX stood backlog with

sold in to the senior and or IHAM CLOs managers managed credit loans course Hill have quarter-end exited Management. by its at and Asset to Capital I market personal loans or new on basis. throughout ordinary linked since value sources build of IHAM note million for market want middle Ivy arm's maintain other existing that an $XX history, investors, to loans funds to from Ares sold the fair leading investments our repaid we middle included

in loans currently us million capacity managed additional $XXX we of of addition sold the loan rest have In April, process we from more in to loans IHAM IHAM anticipate acquire that the year. the will sales to additional an have and to funds throughout

remarks. turn Kipp some call I over for to will back the now closing

Kipp deVeer

Thanks, Mitch.

In recession recognized the that we're economic times prospects a in face and default economic rising we unprecedented of and closing, rates. lasting

we However, with regards Corporation remain Ares to today. Capital optimistic

terms control risk over we have our management. lot defensively a positioned discussed, own As destiny a in portfolio with of of

management managing which the through team, We and our highly supports restructuring benefit infrastructure cohesive from seasoned and and efforts. challenging times, has significant these portfolio robust experience

in Additionally, that balance we believe today's we have a strong market. sheet provides a unique advantage

and our portfolio to have our view access us companies, liabilities provides companies. and others supportive this robust asset portfolio of We many sponsor to in of strategic as a retrenching. existing solutions that support relationships to undrawn market allows all are We remain while this liquidity

so portfolio no our to have satisfy, can capital to debt also We support investing near-term maturities we focus companies.

I'd We'd challenging to So of like ARCC. for in although for see work of very confidence some, this our team market through like market opportunities is through times. current and in extremely shareholders and their the to environment difficult encouraged also period. for in all hard closing, their the we by the dedication entire thank loyalty this we're all these for us difficult thank

our prepared happy remarks. open line concludes to for That the We're questions.

Operator

Instructions]. [Operator

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

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

Arren Cyganovich

Thanks.

to of past, it's coming worked and this in little in you out scenario with compared type have this You've a how through could The dealt bit to talk Great given through about you've Recession been that what the Maybe the of you're differs past you're company support of in of stronger. entire some relief help of in what give on your willing the payment support the some terms of levels broadly and country, so just what kind to doing borrowings? portfolio impacting things across

Kipp deVeer

hear is just checking this can make Kipp. Arren, I'm to Sure, you sure me.

Arren Cyganovich

Yes, hear I can you.

Kipp deVeer

And go-around different. I for and viewed liabilities, Thanks right? to the cetera. There assets as we get our couldn't question. the et liquidity is as all This different, it's much comparing go-around one's the into that company viewed very a too of liability The go-around I collateral issue. very didn't a had driven or and go mismatch Super. last won't maybe contrasting but concern taken itself, last this think have away. I finance would

to capital all be been view having in we having emphasizing what And downturn of downturn credit because would that excess think the where tried to be remarks great a having of long-term next very having our prepared the important. emphasize it's and I our always powder about been dry around would that is and we've access having lots feel which financing, we've borrowings, liquidity, liquidity-driven

are We right no Yes, this attendance have or obviously is different. that very have one revenue. operating or companies certain not

If that's a that's doing closed, whole for new not takeout your reality. restaurant Yes, instance.

March, I the think the amount we're liquidity of we So way made in a companies. at companies, a payments make a prepared Mitch really which it perspective. we've payments, from modifications of our did it outcome small that some to very got interest tremendous support portfolio portfolio a XX. than did is, but in XX% contractual collect the We looking remark few comments to less good was number, was

So just equity And they side with sponsor private the enough other doing to and they're equity the reemerge. to digging create now in can get company to each how figure what owned company. with right so the we're that out liquidity private on side each for if is asset

Arren Cyganovich

would point, to provide guys? joint provide willing guess private is of they I you're how has to this also support I equity kind additional that you sponsors very imagine that last the on effort with with, a along working are support,

Kipp deVeer

through that But is know to some come a figure the into of most kind joint triage it's equity companies, impacted did circumstances. helpful. we it's liquidity for ongoing have i.e. and can because yes, to right. very a and names the that. circumstances forecast how of in so out we it circumstances with right it's how a lot sense equity it's additional when don't needed? reopen mean, how we great ramp have private I private discussions difficult those having looks of -- the of sure. and it's those firms we're process, in hugely and exactly sense Where some liquidity now, equity in And if don't company it's the reopen few around like. some headroom get what to we have? good the a deal was quarter-end we it's And Yes, does And much obviously approach. that create just the And highly But uncertain, firms in

So the same issues equity have private the been work generally, we're to say all clients we trying supportive. but work that together, through I'd with very

Operator

comes JPMorgan. Please The Rick next Shane question of ahead. from go

Rick Shane

Hey, you guys, hear me? can

Kipp deVeer

can Rick. I hear Yes, you,

Rick Shane

Excellent, hi, Kipp.

this you quarter in a uncertainty, in valuations? unusual the some fair given that of did of look, sort process, as or the went just your was terms approach the terms of is So terms of mark-to-model your qualitative I'm or very through mark-to-market curious different either any find you overlay process, of degree value in

Kipp deVeer

there's exact little Sure, of bit same process a Rick. no, Typically, a lag, right.

to you're impacts. the had see in have companies most are take to when to part, qualitative So impacted. as COVID the you'll some those We full for you're financials not a most March valuation, doing impacts that specifically view January going

we up quantitatively to of of very that the incorporated qualitatively. the real course pandemic, the time quarter. of the And what say, closer the we way end was to I'd having both were all conversations So epicenter do were and those we with did companies

if changed outstanding liquidity liquidity the a we have into convention would that that needs, we say ourselves upon all. a example of factored that of where process thought actually were that nothing debt, the took there from perspective, valuation be at of but would need An company a we a XX%

Operator

Hecht The next Please John from question of go comes Jefferies. ahead.

John Hecht

everybody's Good voice. hear morning. Good to

and the just March. You of shutdown bottoming you update are. seen can give of that your see guys what maybe can I'm are the I'm And good where just things because can certain if was through those are thresholds in seeing you kind largely pretty give you month us guess. wondering picture give you was what full of through a you've place. categories of where in there activity us on course of portfolio going the was where April, on an us, April, wondering, I

Kipp deVeer

are think doing -- it's that doing the how firms maybe the John in April. literally month our But again April's month better, hey daily March, than of of through I that think a of whatever obviously, a you? And or things private not are mean, right, I or you not tougher different I than no that people March I or whether Yes, still The first well. By basis, two had if and our and of way, they We're were the retail to borrowers, was equity attendance, the week places restaurant hope guys probably had approach. talking change basis. require March's. materially on weekly and sort

they're But it yes, where of more And have require hands for longer duration the biggest today. the and issue how now is of obviously, on. just support goes just our we these the to companies, this certain that's goes long going the on

John Hecht

then give much in a are you the and curve? spreads good place. to widened the us mention, got have How right and since take I the guys wide -- How the of position do up a are did end And since advantage that guys you you can of much guess at Okay. of how obviously sense spreads end maybe quarter? of they've we time the

Kipp deVeer

tell. we few which any a not, software quoted on couple, to really regular things flow. I we've say, there's And we an on quarter was there around it's happening, are impacted. hard COVID basis think probably actually a Yes, of it's deal And I companies so mean, existing redo deal, portfolio new had are of it don't would not a way least was that would end. XXX for one company our that say it points to -- at I was this sponsor right one sold sponsor businesses. not

range we on them we lien cap at now, at a large related buy existing at COVID of deals where and have type companies, But for investments looking we're opportunities to land, in capital positions even have can secondary double-digit we're new things are discount. that a where lot in looking that seem first

So sponsors basis documentation, get to much on sheets. tranche better response least of term at points in them. kind regular They're no happy way it's XXX a unit from just

for willing part and that the see I if they're finance to folks most something they transaction think find the exciting.

Yes, Mitch number, lay some obviously, in average and out invested where capital we on XX%. that did referred one we return that was rate almost capital of April, to the

I think Mitch said it was XX.X%.

So there's some have and things have pretty, interesting. to you do here you pretty if are that capital liquidity

John Hecht

Excuse good update I with imagine. Yes, I appreciate everything. imagine me; the I and luck

Kipp deVeer

Thanks John.

welcome. You're

Operator

question next Lee The comes RBC Kenneth from of go Please Markets. Capital ahead.

Kenneth Lee

taking for thanks question. my Hi,

can you Just you wondering company broadly, programs? of from loan see Federal kind whether comment Reserve potential of any benefit your the could portfolio just -- any within the if on

Kipp deVeer

It's actually PPP Yes, to taken decision lender of lender seen where to advantage are the number most most portfolio have for not in right. it as small today. we owned tends remember, a the of that think our We're the companies. companies I know, make, these usually part. be program a people that's a to equity We've some And companies. non-private the

influence that had and been or apply family-owned whether owned they as works And But are programs. for capital businesses those where lot So to those typically of those actually under who them. folks to own all management there. teams entrepreneurs apply have getting some we how have those don't have companies or there chosen either have success a by some

Kenneth Lee

given follow-up could just And provide very any I I helpful. environment? just the Got Thanks. just on you if one wonder expectations all originations updated may. loan near-term you, if current

Kipp deVeer

fashion. in We QX Yes, a a don't -- any point quarter Mitch this had glanced the of made the maybe maybe having expect this and we the that quarter. would in it's fair research funded do originations really guidance end of amount provide thought. typically of into We say revolvers too. hard. some I going people busier at morning, we

So a big is it. portion that of

be will to that make net flurry that unlikely it's revolver likely are the get syndicate market. think also mentioned, that for number will there's growth one I drawings, because funded to that acquisitions the which We a to draws had as this difficult lower which really that mentioned delayed don't is I typically and difficult. basis. in Mitch deal do going they're on But of

So look to the couple and needed. I new hard pick portfolio do surprised companies remains really most deals. certainly financing And a existing where of focus to a wouldn't it's that's be But number.

Operator

question Finian comes Wells from go next of The Please O'Shea Fargo. ahead.

Finian O'Shea

Hi, good everyone's doing the a Hope question want on morning. I ask to order. well. exemptive

these or markets? I can us the give funds engaging more Would this investments Mitch in mentioned of follow-ons that given club the to you context the of think buy syndicated now scale take of investor new relief. you pursuant you unrelated nature be Can follow-ons on where would planned with issuers, under some you strategy? or out positions in

Kipp deVeer

hope I doing well. Fin. you're Thanks

both right. do we think can I

follow-ons of permissible and all that. secondaries are are fine, So

has for the liquidity, right. gives think takeaway more been, us I picture big just us it

BDC portfolio additional So capital et the right, actually protect et us at of a in security the kind for gives co-investment the same to relief invested the -- at positions, companies, support in past, same help was allowed this company, if in or the cetera. and exemptive time cetera, same

It ARCC gives bear. to just the a capital it in again, us doing the will. bigger chest war So just point we think I any ever to additional prepared remarks. the extent brings follow-ons, don't had issues which to

Finian O'Shea

are sheet that down then CLO you context from little those or down for sheets? down balance it down you Hill on Ares generally can sell sell give you selling when new Yes, if I follow-on Is do and completely mostly existing And vehicles? it or Ivy Hill. equity? of a CLO on Can And the equity just that, debt a make breakdown investments in agree. breakdown This a you -- Ivy balance CLO holds? bit. little you any a is came the commitments these Ivy are two-part in to Hill, Or

Kipp deVeer

so equity. Yes, over investments are investments of years. in funds that in typically they've raised have Those we loads Hill, CLO the Ivy

XX levered, a leverage in not As quarter Hill a marks in CLO-related marks XX traditional were But have a they're obviously bit in less cap that's or they reminder, too. the so anything the typically CLO. typical the CLO the down, to down than much X were Ivy large

In terms of investments the made. selling assets that that them, we're we've existing selling are we to them typically

remarks. that than So we lien Most a a first be they they happy after done. will but soon often sale of others. of prepared of Mitch is buy transaction. time we've from them from reasonably it's buy look in us, come They'll buyers new syndication, closing transactions sell of the paper the that more most so general part papers referenced that the not a the of

Operator

question Please Ryan from ahead. KBW. go next The Lynch of comes

Ryan Lynch

Yes. a question maybe $X.X the existing How first revolving and delayed you much -- in that either the but I it, commitments the you portfolio companies? of from said funded billion was missed quarter. I guys had existing that drawn of and through or on unfunded

Kipp deVeer

I'm room. remotely Yes, a to the and second of do of going in may give I at look us obviously here, wave same Penni kind to trying all notes. We're this some not through my

us real Let quick. look

we can up up So I'll follow can, that if you with come number with you.

Ryan Lynch

have they fee those? level dramatic is to substantially the second typical delayed high new quarters, of record that any several fluctuate, origination your as of guys income fees with range. that every just something Or borrower, the guys quarter, have a think quarter. commitment? if an to guys when last that I would of as is Are or also out I seems originations quarter? that talk about, And mean undrawn a on XXs at of draw you those least recurring look all just north fee that you structuring, either you exist term then that XX an recurs in Sure. fund is that that you that get existing smaller to the kind anywhere in Or highly or fee what coming loan fees that all part on on not that's of and income, like all? I you basis, on at near-term. based the of you facility fees same are new a quarterly is Obviously change structuring make do in income, guys that the Can a the a over guys fee it at guys revolving you as for of; can you that a revolving And dependent and level take income structure that that,

Kipp deVeer

line we of actually Yes, say you're will right. It's which think amendment of, in things, I right. the also is the me be just of, the been remainder be I mean fee historically. here of this There'll year. for fees new fewer It's Mitch mentioned. really I Penni deal there two which more has number did was there's fees think texting kind that

typically million So on are revolver bad, I those fees too, $XXX paid delayed it and Ryan, The draw feel guess funded we I under so loan forgot don't closing. at term fundings.

fees in reference coming the So this other don't those quarter fundings. They're really places. from

Ryan Lynch

Okay.

Kipp deVeer

at they revolvers funding, Delayed we'll little and typically can sometimes at some different, differ. paid partial upfront. bit Delayed drops are draws closing fee a have

Operator

JMP of York Chris from comes question Securities. next Please go The ahead.

Chris York

me? you hear can Kipp,

Kipp deVeer

Chris, can you? how I Now hi, are

Chris York

Thank asked are probably think probably more this stress. you. I from competing good my I'm partners, environment, so a but during interests move for achieve be In I structuring Hi, they high-level tested relationships important can than will fee to to ever question. question, well. Ryan outcomes

as shareholder a portfolio the lender, capital you for business? need risk So enforcing as sponsor deteriorate rights the when company our in are relationship the by evaluating question conditions impairing dig a to here, versus future of for you how you protect

Kipp deVeer

and something for XX mean being built this I our counterparty. our been we've Yes, responsible on reputation doing and look, obviously, a company we've years

for where we the obviously we everything finance is in have XX transactions today. portfolio negotiation. a And sponsors five simple So to not one-time us

think now shared equity are private our have define I with And to just right incentives strong. I relationships think right. we our these partners for really solutions companies,

others. That But companies discussion I'm business. come adjusted our can and little -- that that being be have a said, the been in because need a paid highly in for for in high situation more less little can we and portfolio EBITDA, equity difficult is to a think prices concerned than challenging bit private if bit current own on I

and said not companies roll-up and gets, sleeves to our our outcome it. do to that's people if achieve know own it XXX private so again good clients, preferred we'll our through think we've with we of recovery. obviously As equity get where and And or all how but them certainly we

business we're business, in in the into we companies, not not to a stakes our right, that turn certainly hope but balance, of do loans needed. making really we equity ability that's So an have where that it's

Chris York

color. largest follow-up I the company which decades for it of more The was in years write-down a XX relationships. investment. question the the quarter. OTG, was think on is five or portfolio And then top thanks Perfect, two Investors long-term appreciate

faces travel company's may you how from your are model, investments? business and comfortable Obviously, threat then altered. in all severely of here tons in I think there's the environment, be the liquidity your future in its marks but a operating uncertainty COVID, So airline

Kipp deVeer

airports. of don’t forecast question, through forecast of to OTG. amount a is the half We for on think single look, at for to control little provide operate get answer mean got right. trying want of the the they passenger workforce a on traffic commentary now. on provide I that of lot the we've reasonable to travel and in I a under tough, Yes, the but But a fraction I'll To air the XXXX names, the for year operated going with back bit past situation they've

I on they're mean good the is current news interest their payments.

working through. the with get advisors right out with done today sufficient to deal situation. liquidity and figure and them, We're they obviously way they've best well some have as So everything the to to

Operator

Instructions]. [Operator

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

Casey Alexander

us wouldn't of across the is really this, as morning, well. good I doing and we think across space months. events but like hope instructive a over I answer the ask Normally, I question next look there for few can Hi, the be all everyone

to if equity private what with and response that going sponsor? of for was the Was was in what into implicit And from or out ask of I'm kind So or you PIK? you non-accrual past a forbearance, payment fund interest that three conjunction the can reclassify those explain made loans capital? it in a

very to the the questions I think us to helpful mean, cycle? can I rest the over out looking that answers like of be

Kipp deVeer

our interest payment, it which make yes, remains unchanged, on doesn't on an policy company Casey. goes is non-accruals if mean Look I non-accrual. Yes, thanks a

not In PIK terms that it PIK to is to that income deem of income we will accrue, cash to or PIK, if converted if approve we be income, want PIK uncollectible, right.

QX than So I hasn't better changed the policy expected, all. was mentioned. as at

is on modifications fewer we're mentioned, in I we QX going I an as challenge ongoing to think made But working than look QX we solutions. XX and as forward. be

that hope question follow-on if I to you answers So want the please.

Casey Alexander

sponsor? Yes. The on you with those answer only didn't part was that equity private placed the that non-accrual communication what on of that kind the flow were was

Kipp deVeer

I don't us think right. -- non-accrual is for and white, pretty black they

we past even think of I spend don't accrual it's et lot But won't collect time it's equity if think we cetera, a whether So we not non- it. not loan if collectible, not. a firms thinking due, have or about private

Casey Alexander

I appreciate for questions. my Yes, thanks Okay, appreciate Thank that. it. it. taking you for I

Kipp deVeer

Thank you.

Sorry Thanks. about that.

Operator

next Robert of James. Raymond comes ahead. from question Dodd Your Please go

Robert Dodd

okay. and as to me hear can everybody is doing glad hopefully Hi, hear everybody everybody

of So a Hecht's. follow-up of one a couple first, quick John questions kind on

only payments XX contracted is that structures you So quarter the collected interest and April amended first told behind the but in obviously first us, XX XX% in essentially you the April, us. quarter mean were loan I now of

that are the those what to payment interest contractually which of contracted the payers monthly in think April? I is for paid bulk, percentage So portfolio

Kipp deVeer

that right. many monthlies. loans -- We we contracts, have do multiple don't that roll I different Yes, have have term don't companies LIBOR

general, making people we March. changes say payments haven't April in we any I the So interest versus material and experienced end just haven't of

Robert Dodd

pace Got change is seeing on desk pace it. the QX mean come I to it, right change and that amendments, maybe them pretty only Any those you then the of XX you're now? in changes whatever And in across got the want call XX, any good.

Kipp deVeer

mean become, I think right. the more this lasts, longer I companies Well, the impacted

So stay work it with which longer will that the be folks. to need trying money equity we're we concessions And optimistic through of think the part goes, part come, solutions make to tougher solution. firms. private us, But willing to I the of can from with that we from becomes. this And

And sort I I mean, things I unfortunately to we're some difficult the hopeful because government reopening. really it's talk the to that everybody's this. how to it's yes, trying But, no to companies is equity it's it's and same these March having included down, a about didn't of lenders, et capital, limited hunkered a mean expecting management cetera. was out the early news we're teams, and this from think furloughing we And the have lot dealt go to deal think so workers look, moving where private programs whether on have good plan one of with that cetera towards here. of figure most like I But effectively. about et just companies pretty forecast and in

Robert Dodd

look Power the I Obviously, at go me, the towards hasn't bought at mean like the back pretty question, past, of I you've sort Okay, on tiny fact, there, cetera, go but fair But dollar to portfolios enough. back deep asset the end next pennies out XXXX/XXXX On yet. and opportunistic at in way happened discounts. of we in Systematic follow-up. can buying quarter. if to it it's that one can stands been the all et I you that

what's in maybe cost or picking bit. have million you've that available, that up the or at X.X opportunistic loans, portfolio your funds not even but necessarily maybe for even to Looks started pieces BDCs of little already distressed of potentially portfolios, opportunistic stressed this opportunistic terms like be you large of a credit par and the $X.X out one other liquid process some but With liquidity really of not at appetite being was there.

Kipp deVeer

discount know reasonably that. bought past, we have BDCs it's in And know enough capital We've we portfolios, look is I buying how how do large, secondary markets a There be early, been to not I small. to might BDC to guys few today. some for is love but people that it. that limited a think absolutely think that trades to to. value. underperforming argue series mean we've really we And that be I that. and name think at exactly it's we everyone there so It's I single But absolutely a I'd serious a things obviously this done amount we've think But at fair of direct to the And what in positioned the we we're fair we'll that. week, been I'm sure, Yes, with trades truly know pay in been with. done we But few of probably far. doing we will attention pretty sure counterparties calls familiar open have you got earnings is

Operator

comes Derek America. question Hewett of The next Please from ahead. of Bank go

Derek Hewett

actually the coverage Hey, provide more looks than it color non-accruals, could improves. went of just and some you bit other a the net -- down like interest leverage everyone. went statistics little afternoon, credit on Good

So could you talk about that dynamic?

Kipp deVeer

in numbers Derek think I mean running than if I the nothing, there the portfolio mean neighborhood correctly, those it themselves. mix been I as Yes, management past. nothing was has jump calcs. to free other great from anybody the if numbers team in any -- free on. generally thoughts, speak -- just I remember the feel feel same and the the to There's it's But for

Operator

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

Kipp deVeer

to first call. after our Well, everyone say remote thanks earnings

appreciate the today we'll to everybody with of Thanks. get back think shareholders to we've well. company's through these the time to be back and you QX line, got certainly I and and pretty you to to dealing the all end in for for just keep going well-positioned, and the on what's hard portfolio to companies, work but company taking I wish the August. at we'll on listen working talk the

Operator

for gentlemen, Ladies concludes today. this call conference our and

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

XXXXXXXX. reference conference please again replays number XXXXXXXX, all For

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disconnect. now may Thank you. You

Ares Capital (ARCC) 5 May 202020 Q1 Earnings call transcript