Ares Capital’s Pending Deal Pipeline Reaches $2.5 Billion as EPS Declines
Key Facts
Ares Capital had approximately $2.5 billion of investments awaiting closing as of October 22, 2026, alongside a decline in third-quarter core earnings per share, according to the company’s statement. The pipeline includes transactions approved by the investment committee or covered by authorizations, letters of intent or signed commitments. The company said completion of these investments is not guaranteed, as they remain subject to closing conditions. The chief executive said a slower deal environment led to a more measured pace of investment originations during the quarter. He added that the pending pipeline had increased substantially from the previous quarter and that deal activity was stronger entering the fourth quarter.
Core earnings per share were $0.46 in the third quarter, compared with $0.50 in the same period of 2025, while net investment income fell to $328 million from $338 million. Net income under generally accepted accounting principles was $319 million in the third quarter, compared with $404 million a year earlier. Total investment commitments declined to $2.109 billion from $3.924 billion in the year-earlier quarter. Exits totaled $2.473 billion, compared with $2.625 billion. Management said a slower deal environment slowed investment originations during the quarter, while noting an improvement in activity at the start of the fourth quarter.
The company provided additional indicators of financing activity during the quarter: new investment commitments totaled approximately $2.1 billion, of which about $1.6 billion was funded. The commitments covered 25 new portfolio companies and 28 existing companies. The weighted average yield on debt and income-producing securities funded by the company was 10.4% on an amortized-cost basis, while the weighted average yield on total funded investments was 10.2%. Floating-rate debt securities accounted for 85% of new commitments, and 74% of those securities included interest-rate floors. From October 1 to October 22, the company made new commitments of approximately $1.1 billion, funded about $855 million of them, and recorded a weighted average yield of 10.0% on funded debt and income-producing securities.
Portfolio investments at fair value totaled $29.213 billion on September 30, compared with $29.485 billion at the end of 2025, while the number of portfolio company investments rose to 636 from 603. Net asset value per share fell to $19.31 at the end of September from $19.94 on December 31, 2025. On credit quality, non-accrual loans represented 2.4% of investments at amortized cost, compared with 1.8% at the end of last year. On a fair-value basis, the ratio was 1.4% in September, compared with 1.2% at the end of 2025. The chief executive described portfolio performance as healthy and credit quality as stable, alongside an increase in the non-accrual loan ratio under both the amortized-cost and fair-value measures.
Ares Capital declared a fourth-quarter distribution of $0.48 per share, payable on December 29, 2026, to shareholders of record on December 15. The chief financial officer said the company enhanced its borrowing capacity by issuing $750 million of unsecured notes with a seven-year term during the quarter. Available liquidity was approximately $7 billion, according to the company. The distribution and liquidity were included in the company’s disclosures on its financing resources following a quarter in which total investment commitments declined from the previous year. Ares Capital shares closed at $18.51 on October 27, compared with a close of $18.61 on October 26, according to closing data.
In a separate deal announced on October 27, Ares Capital agreed to acquire investment company MedCap Financial in a transaction with an enterprise value of approximately $2.6 billion. The announced consideration is equivalent to $10.88 for each diluted share of the target company, consisting of approximately $1.21 in cash and $9.67 in Ares Capital shares. The consideration represents a premium of approximately 30.1% to MedCap’s closing price on October 26 and 25.8% to its 30-day volume-weighted average price through that date. MedCap estimated its preliminary net asset value on September 30 at approximately $12.86 per share. The consideration includes an adjustment to the stock component tied to MedCap’s expected special distribution.
Ares Capital expects the deal to increase its initial combined portfolio to more than 800 companies and fair-value investments to more than $31 billion, based on September 30, 2026, data. The company said the acquisition is expected to be modestly accretive to core earnings per share and to support future distributions. Wells Fargo has agreed, subject to customary conditions, to provide an additional $750 million in secured financing that may be used to support the deal. The companies expect to complete it in the first half of 2027, following approval by MedCap shareholders, regulatory approvals and satisfaction of customary closing conditions. MedCap is expected to report third-quarter results on November 5, 2026, including final net asset value per share as of September 30.