Ares Capital Completes $708.7 Million CLO Refinancing with Extended 2038 Maturity

Refinancing Structure and New Debt Issuance

On July 17, 2026, Ares Direct Lending CLO 1 LLC, a wholly owned consolidated subsidiary of Ares Capital Corporation, completed the ADL CLO 1 Reset Transaction, which involved a comprehensive refinancing of its existing collateralized loan obligation structure. The refinancing generated new senior and subordinated debt instruments totaling approximately $708.7 million, all maturing on July 25, 2038. The issuance was made pursuant to an amended and restated indenture and security agreement dated as of the refinancing date, with U.S. Bank Trust Company, National Association serving as collateral trustee.

The new debt securities issued in the transaction comprised multiple classes designed to meet different investor risk and return profiles. The Class A-1-R Senior Floating Rate Notes totaled $267.0 million and bear interest at Term SOFR plus 1.46%. The Class A-2-R Senior Floating Rate Notes amounted to $24.5 million and carry an interest rate of Term SOFR plus 1.70%. The Class B-R Senior Floating Rate Notes represented $45.5 million of the issuance and bear interest at Term SOFR plus 1.90%. Additionally, Ares Capital issued $7.1 million of new subordinated notes that do not bear interest, which when combined with $225.6 million of existing subordinated notes, comprise the full subordinated tranche retained by the company.

Asset-Backed Collateral and Portfolio Management

The July 2038 CLO notes are secured obligations backed by a diversified portfolio of first lien senior secured loans that were contributed to Ares Direct Lending CLO 1 on May 24, 2024, pursuant to a contribution agreement with the parent company. These secured obligations include the Class A-1-R and Class A-2-R notes, the Class B-R notes, and the term loans issued under the new credit agreement. The portfolio backing these securities is actively managed by Ares Capital Management LLC, the company's investment adviser, which serves as asset manager for the securitization vehicle.

The indenture governing the new CLO notes contains provisions permitting the acquisition of additional collateral by the securitization vehicle, subject to compliance with rating agency criteria and agreements with certain institutional investors who purchased the secured notes. Through July 25, 2031, all principal collections received on the underlying loan portfolio may be deployed by the asset manager to acquire new collateral in accordance with the company's investment strategy. The asset manager has agreed to waive any management fees that it might otherwise receive from the CLO vehicle, aligning incentives with the interests of note holders.

Term Loan Facility and Lender Conversion Rights

In connection with the refinancing, Ares Direct Lending CLO 1 also entered into a credit agreement dated July 17, 2026, under which it incurred $139.0 million of Class A-1-LR term loans. These loans bear interest at Term SOFR plus 1.46% and are scheduled to mature on July 25, 2038, matching the maturity of the new note issuance. U.S. Bank Trust Company, National Association serves as loan agent and collateral trustee under this credit agreement. The term loans were provided by various financial institutions and are subject to customary covenants and events of default.

A notable feature of the term loan facility is that lenders retain the right to convert their outstanding term loans into Class A-1-R CLO Notes, subject to certain conditions specified in both the indenture and the credit agreement. This conversion feature provides lenders with flexibility to adjust their position within the capital structure of the securitization, potentially offering enhanced liquidity options or modified risk profiles depending on market conditions and transaction performance.

Redemption of Prior Securitization Debt

The net proceeds generated from the ADL CLO 1 Reset Transaction were deployed to retire the company's previous securitization debt in full. Ares Capital redeemed $406.0 million principal amount of Class A Senior Secured Floating Rate Notes that were previously due in 2036, along with $70.0 million of Class B Senior Secured Floating Rate Notes also scheduled to mature in 2036. By eliminating this 2036 maturity, the refinancing extended the debt profile of the securitization vehicle by approximately two years, providing extended runway for portfolio management and reducing near-term refinancing pressure.

Beyond debt redemption, proceeds from the refinancing were also used to fund deposits into various accounts of Ares Direct Lending CLO 1 and to pay fees and expenses incurred in connection with the ADL CLO 1 Reset Transaction. The use of proceeds structure demonstrates a disciplined approach to managing the securitization vehicle's balance sheet and ensuring adequate liquidity reserves are maintained to support ongoing operations and collateral management activities.

Administrative Infrastructure and Ongoing Management

U.S. Bank Trust Company, National Association continues to serve as collateral administrator for Ares Direct Lending CLO 1 under an amended and restated collateral administration agreement dated as of the refinancing date. The collateral administrator oversees day-to-day portfolio administration, performs compliance testing, and manages various administrative functions required to maintain the securitization in compliance with its governing documents. The collateral administration agreement is among Ares Direct Lending CLO 1, Ares Capital Management LLC as asset manager, and U.S. Bank as collateral administrator.

The asset management framework governing the securitization includes an asset management agreement, as amended, and a master purchase and sale agreement between Ares Capital Corporation as seller and Ares Direct Lending CLO 1 as buyer. These agreements establish the terms under which additional collateral may be acquired by the securitization vehicle from the parent company or from third parties, all conducted in accordance with the company's investment strategy and subject to portfolio reinvestment guidelines established through the securitization documents.

Regulatory Classification and Registration Status

The July 2038 CLO Notes have not been registered under the Securities Act of 1933, as amended, or any state securities or blue sky laws. The notes were issued in reliance upon an applicable exemption from registration and may not be offered or sold in the United States absent registration with the Securities and Exchange Commission or confirmation of an applicable exemption from registration. This regulatory treatment is typical for securitizations of this type, which are generally structured to be sold to institutional investors in private placement transactions.

The indenture and credit agreement governing the new debt securities include customary protective covenants and events of default designed to protect the interests of note holders and lenders. These provisions establish financial thresholds, restrictions on asset sales and acquisitions, limitations on additional debt issuance, and other safeguards intended to preserve the credit quality of the securitization vehicle and the underlying loan portfolio throughout the life of the transaction.

Implications for Capital Structure and Liability Management

The completion of the ADL CLO 1 Reset Transaction demonstrates Ares Capital's continued access to securitization financing markets and its ability to refinance maturing obligations on favorable terms. By extending the maturity of approximately $708.7 million in financing through July 2038, the company has reduced its near-term refinancing needs and established a more predictable liability maturity profile. The secured nature of this financing, backed by a diversified portfolio of first lien senior secured loans, aligns with the company's business model as a closed-end investment company focused on providing direct lending solutions to middle-market companies.

The interest rate structure of the new debt, ranging from Term SOFR plus 1.46% for the highest priority Class A-1-R notes to Term SOFR plus 1.90% for Class B notes, reflects prevailing market conditions as of the refinancing date in July 2026. The floating rate nature of these obligations creates a direct correlation between the company's borrowing costs and changes in the benchmark SOFR rate, which in turn affects the returns available to equity investors and the company's net investment income generation.

Portfolio Reinvestment and Capital Deployment Framework

The reinvestment period extends through July 25, 2031, during which all principal collections received on the underlying collateral portfolio may be used to acquire new loans subject to the asset manager's discretion and adherence to established portfolio criteria. This framework allows Ares Capital Management LLC, as asset manager, to continuously refresh and optimize the loan portfolio held within the securitization vehicle in response to market conditions, borrower performance, and evolving investment opportunities consistent with the company's stated investment strategy.

Following the expiration of the reinvestment period on July 25, 2031, Ares Direct Lending CLO 1 will enter an amortization phase during which principal collections will be applied to reduce outstanding debt balances rather than fund new acquisitions. This staged approach is standard for CLO structures and reflects the typical lifecycle of securitized debt portfolios, balancing the objective of portfolio optimization during earlier periods with the goal of returning capital to note holders as the securitization matures.