Ares Management Corporation announced the final closing of Ares Senior Direct Lending Fund II (“SDL II” or the “Fund”). With total equity commitments of approximately $8 billion, SDL II was significantly oversubscribed relative to its initial target of $4.5 billion. The Fund is over 2.6x the size of its 2018 predecessor fund of $3 billion. Including anticipated leverage, the total capital base for SDL II is expected to be approximately $14 billion. SDL II, together with the recently announced final close of Ares Private Credit Solutions II (“PCS II”) at $5.1 billion in October of 2021, brings the total commingled fund capital raised by the Ares U.S. direct lending team for the second vintages of these two flagship fund families to over $19 billion, including anticipated leverage.
Through SDL II, Ares provides directly originated senior secured loans to middle market companies primarily in North America. Ares has deployed the same strategy in SDL II as its predecessor fund, SDL I, with investments in companies of $10 million to over $150 million of EBITDA where Ares acts primarily as the lead investor. Ares seeks to invest in companies that maintain a strong competitive position in their respective markets with experienced management teams and strong free cash flow characteristics. SDL II has already deployed significant capital with the Fund committing over 30% of its investable capital base across a diverse portfolio of over 70 companies.
The Fund benefits from the significant direct origination capabilities, incumbency and scaled capital base of the Ares U.S. direct lending platform that allows the team to identify, evaluate and execute on attractive investment opportunities in the middle market. With over 380 portfolio companies and more than $85 billion of capital invested since its inception, we believe that the direct lending team’s experience will benefit borrowers and provide opportunities for investors to receive attractive risk adjusted returns. Ares operates a leading global direct lending platform, with over $125 billion in assets under management in North America, Europe and the Asia-Pacific region.
“We are thankful for the continued support of both new and existing investors for our second senior direct lending fund,” said Kipp deVeer, Partner and Head of the Ares Credit Group. “The over $19 billion of capital between PCS II and SDL II is a testament to the capabilities, scale and market leading position of the Ares U.S. direct lending platform.”
“Ares’ established investment approach, which emphasizes direct origination and lending to businesses with high quality management teams and strong sponsorship has remained consistent over the last seventeen years,” said Mitch Goldstein, Partner and Co-Head of the Ares Credit Group. “We believe our senior team’s experience of investing together through multiple cycles and prolonged dislocations is a strong differentiator in the market today.”
“As investors continue their hunt for yield, we believe directly originated senior secured loans in North American middle market companies offer attractive relative value in a low interest rate environment while also providing investors with opportunities for attractive current income with reduced volatility,” said Mark Affolter, Partner and Co-Head of U.S Direct Lending.
“We are pleased to provide our flexible capital solutions to our borrowers, who increasingly seek to partner with lenders of scale such as Ares,” said Dave Schwartz, Partner and Co-Head of U.S Direct Lending. “We look forward to continuing to be a capital provider of choice to leading financial sponsors and middle market companies.”
SDL II attracted strong support from a broad and diverse group of investors from North America, Europe, Asia, Africa and the Middle East with support from both existing investors and new investors to the Ares platform. SDL II’s global investor base is comprised of pension funds, sovereign wealth funds, insurance companies, high net worth individuals, family offices, funds-of-funds, endowments and foundations.