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Ares Capital, Varagon Announce Launch of Senior Direct Lending Program

August 04, 2016, 07:41 AM
Filed Under: Industry News

Ares Capital Corporation (ARCC) and Varagon Capital Partners announced the Senior Direct Lending Program has officially launched. First announced in 2015, SDLP was formed to provide complete financing solutions to middle market companies and sponsors without syndication requirements. SDLP launches with nearly $3 billion of investment capacity initially and will make loans with a hold size of up to $300 million. In addition, Ares Capital and Varagon may invest alongside SDLP to accommodate larger transactions.

SDLP recently completed the purchase of more than $900 million of loans from Ares Capital and American International Group, Inc. (AIG), Varagon’s strategic investment partner. Following the acquisition, SDLP is capitalized with $194 million of Subordinated Certificates from Ares Capital and $732 million of notes and Subordinated Certificates from Varagon clients.

“Over the past year, we have worked seamlessly with our partner Varagon to close the ten unitranche loans in the initial portfolio of SDLP,” said Mitchell Goldstein, Co-President of Ares Capital. “As banks continue to retrench from middle market sponsor lending, SDLP provides an attractive alternative for our financial sponsor clients as they look to finance, or refinance, high quality portfolio companies.”

"We value the strong partnership we have built with Ares Capital,” said Walter Owens, Chief Executive Officer of Varagon. “SDLP is an innovative vehicle that has received a strong response from middle market sponsors seeking competitive financing solutions. We look forward to growing SDLP with Ares Capital over the coming years."

SDLP invests in senior secured loans to middle market companies, including stretch senior and unitranche loans, and has a hold size of up to $300 million. SDLP lends to borrowers across industries that seek the speed and certainty of closing provided by large commitments and simplicity of documentation. SDLP is a joint venture between Ares Capital Corporation and Varagon Capital Partners.

Ares Capital is a leading specialty finance company that provides one-stop debt and equity financing solutions to U.S. middle market companies, venture capital backed businesses and power generation projects. Ares Capital originates and invests in senior secured loans, mezzanine debt and, to a lesser extent, equity investments through its national direct origination platform.

Varagon is an asset manager focused on direct lending to middle-market companies. Varagon builds lasting relationships with borrowers and sponsors and offers a broad suite of reliable, competitive financing solutions to the middle market. Varagon’s loans are funded by commitments from investors seeking exposure to quality, directly-originated middle market credit. Varagon is backed by American International Group, Inc. (AIG) and certain partners of Oak Hill Capital Management and has approximately $3.8 billion of capital available for investment. As of August 1, 2016, Varagon had approximately $1.8 billion of assets under management.

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