DEBT |
DEBT The following table summarizes the Company’s and its subsidiaries’ debt obligations: | | | | | | | | | | | | | | | | | | | | | | | | | | | | As of September 30, 2017 | | As of December 31, 2016 | | Debt Origination Date | | Maturity | | Original Borrowing Amount | | Carrying Value | | Interest Rate | | Carrying Value | | Interest Rate | Credit Facility(1) | Revolver | | 2/24/2022 | | N/A |
| | $ | 110,000 |
| | 2.75% | | $ | — |
| | —% | Senior Notes(2) | 10/8/2014 | | 10/8/2024 | | $ | 250,000 |
| | 245,149 |
| | 4.21% | | 244,684 |
| | 4.21% | 2015 Term Loan(3) | 9/2/2015 | | 7/29/2026 | | $ | 35,205 |
| | 35,032 |
| | 2.79% | | 35,063 |
| | 2.74% | 2016 Term Loan(4) | 12/21/2016 | | 1/15/2029 | | $ | 26,376 |
| | 25,999 |
| | 3.02% | | 26,037 |
| | 2.66% | 2017 Term Loan A(4) | 3/22/2017 | | 1/22/2028 | | $ | 17,600 |
| | 17,474 |
| | 2.70% | | N/A |
| | N/A | 2017 Term Loan B(4) | 5/10/2017 | | 10/15/2029 | | $ | 35,198 |
| | 35,147 |
| | 2.63% | | N/A |
| | N/A | 2017 Term Loan C(4) | 6/22/2017 | | 7/30/2029 | | $ | 17,211 |
| | 17,206 |
| | 2.75% | | N/A |
| | N/A | Total debt obligations | | | | | | | $ | 486,007 |
| | | | $ | 305,784 |
| | |
| | (1) | The AOG entities are borrowers under the Credit Facility, which, as amended in February 2017 and increased in September 2017, provides a $1.065 billion revolving line of credit. It has a variable interest rate based on LIBOR or a base rate plus an applicable margin with an unused commitment fee paid quarterly, which is subject to change with the Company’s underlying credit agency rating. As of September 30, 2017, base rate loans bear interest calculated based on the base rate plus 0.50% and the LIBOR rate loans bear interest calculated based on LIBOR plus 1.50%. The unused commitment fee is 0.20% per annum. There is a base rate and LIBOR floor of zero. |
| | (2) | The Senior Notes were issued in October 2014 by Ares Finance Co. LLC, a subsidiary of the Company, at 98.268% of the face amount with interest paid semi-annually. The Company may redeem the Senior Notes prior to maturity, subject to the terms of the indenture. |
| | (3) | The 2015 Term Loan was entered into in August 2015 by a subsidiary of the Company that acts as a manager to a CLO. The 2015 Term Loan is secured by collateral in the form of CLO senior tranches owned by the Company. To the extent the assets are not sufficient to cover the Term Loan, there is no further recourse to the Company to fund or repay the remaining balance. Interest is paid quarterly, and the Company also pays a fee of 0.025% of a maximum investment amount. |
| | (4) | The 2016 and 2017 Term Loans ("Term Loans") were entered into by a subsidiary of the Company that acts as a manager to a CLO. The Term Loans are secured by collateral in the form of CLO senior tranches and subordinated notes owned by the Company. Collateral associated with one of the Term Loans may be used to satisfy outstanding liabilities of another term loan should the collateral fall short. To the extent the assets associated with these Term Loans are not sufficient, there is no further recourse to the Company to fund or repay the remaining balance. Interest is paid quarterly, and the Company also pays a fee of 0.03% of a maximum investment amount. |
As of September 30, 2017, the Company and its subsidiaries were in compliance with all covenants under the Credit Facility, Senior Notes and Term Loan obligations. Debt obligations of the Company and its subsidiaries are reflected at cost. The Company typically incurs and pays debt issuance costs when entering into a new debt obligation or when amending an existing debt agreement. Debt issuance costs related to the Company's Senior Notes and Term Loans are recorded as a reduction of the corresponding debt obligation and debt issuance costs related to the Credit Facility are included in other assets in the Condensed Consolidated Statements of Financial Condition. All debt issuance costs are amortized over the term of the related obligation. The following table shows the activity of the Company's debt issuance costs: | | | | | | | | | | | | | | Credit Facility | | Senior Notes | | Term Loans | Unamortized debt issuance costs as of December 31, 2016 | $ | 4,800 |
| | $ | 1,803 |
| | $ | 526 |
| Debt issuance costs incurred | 3,387 |
| | — |
| | 253 |
| Amortization of debt issuance costs | (1,258 | ) | | (174 | ) | | (48 | ) | Unamortized debt issuance costs as of September 30, 2017 | $ | 6,929 |
| | $ | 1,629 |
| | $ | 731 |
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Loan Obligations of the Consolidated CLOs Loan obligations of the Consolidated Funds that are CLOs ("Consolidated CLOs") represent amounts due to holders of debt securities issued by the Consolidated CLOs. The Company measures the loan obligations of the Consolidated CLOs using the fair value of the financial assets of its Consolidated CLOs. Several of the Consolidated CLOs issued preferred shares representing the subordinated interests that are mandatorily redeemable upon the maturity dates of the senior secured loan obligations. As a result, these shares have been classified as liabilities and are included in CLO loan obligations in the Condensed Consolidated Statements of Financial Condition. As of September 30, 2017 and December 31, 2016 the following loan obligations were outstanding and classified as liabilities of the Company’s Consolidated CLOs: | | | | | | | | | | | | | | | | | | | | | | As of September 30, 2017 | | As of December 31, 2016 | | Loan Obligations | | Fair Value of Loan Obligations | | Weighted Average Remaining Maturity In Years | | Loan Obligations | | Fair Value of Loan Obligations | | Weighted Average Remaining Maturity In Years | Senior secured notes(1) | $ | 4,298,009 |
| | $ | 4,279,766 |
| | 10.56 | | $ | 2,839,779 |
| | $ | 2,841,440 |
| | 9.68 | Subordinated notes(2) | 274,341 |
| | 196,877 |
| | 11.15 | | 284,046 |
| | 189,672 |
| | 9.97 | Total loan obligations of Consolidated CLOs | $ | 4,572,350 |
| | $ | 4,476,643 |
| | | | $ | 3,123,825 |
| | $ | 3,031,112 |
| | |
| | (1) | Original borrowings under the senior secured notes totaled $4.3 billion, with various maturity dates ranging from October 2024 to April 2030. The weighted average interest rate as of September 30, 2017 was 4.25%. |
| | (2) | Original borrowings under the subordinated notes totaled $274.3 million, with various maturity dates ranging from October 2024 to April 2030. They do not have contractual interest rates, but instead receive distributions from the excess cash flows generated by each Consolidated CLO. |
Loan obligations of the Consolidated CLOs are collateralized by the assets held by the Consolidated CLOs, consisting of cash and cash equivalents, corporate loans, corporate bonds and other securities. The assets of one Consolidated CLO may not be used to satisfy the liabilities of another Consolidated CLO. Loan obligations of the Consolidated CLOs include floating rate notes, deferrable floating rate notes, revolving lines of credit and subordinated notes. Amounts borrowed under the notes are repaid based on available cash flows subject to priority of payments under each Consolidated CLO’s governing documents. Based on the terms of these facilities, the creditors of the facilities have no recourse to the Company. Credit Facilities of the Consolidated Funds Certain Consolidated Funds maintain credit facilities to fund investments between capital drawdowns. These facilities generally are collateralized by the unfunded capital commitments of the Consolidated Funds’ limited partners, bear an annual commitment fee based on unfunded commitments and contain various affirmative and negative covenants and reporting obligations, including restrictions on additional indebtedness, liens, margin stock, affiliate transactions, dividends and distributions, release of capital commitments and portfolio asset dispositions. The creditors of these facilities have no recourse to the Company except to the extent the debt is guaranteed by a subsidiary or if a general partner is liable for the Consolidated Fund’s liabilities under the applicable law. Credit facilities of the Consolidated Funds are reflected at cost in the Condensed Consolidated Statements of Financial Condition. As of September 30, 2017 and December 31, 2016, the Consolidated Funds were in compliance with all covenants under such credit facilities. The Consolidated Funds had the following revolving bank credit facilities and term loan outstanding as of September 30, 2017 and December 31, 2016: | | | | | | | | | | | | | | | | | | | | | | | | | | | As of September 30, 2017 | | As of December 31, 2016 | | Consolidated Funds' Debt Facilities | | Maturity Date | | Total Capacity | | Outstanding Loan(1) | | Effective Rate | | Outstanding Loan(1) | | Effective Rate | | Credit Facilities: | | | | | | | | | | | | | | | | 1/1/2023 | | $ | 18,000 |
| | $ | 12,942 |
| | 2.75% | | $ | 12,942 |
| | 2.38% | | | | 6/30/2018 | | 47,284 |
| | 30,599 |
| | 1.55% | (2) | 42,128 |
| | 1.55% | (2) | | | 3/7/2018 | | 71,500 |
| | 71,500 |
| | 2.62% | | N/A |
| | N/A | | Revolving Term Loan | | 8/19/2019 | | 11,429 |
| | 6,220 |
| | 5.74% | | N/A |
| | N/A | | Total borrowings | | | | | | $ | 121,261 |
| | | | $ | 55,070 |
| | | |
| | (1) | The fair values of the borrowings approximate the carrying value as the interest rate on the borrowings is a floating rate. |
| | (2) | The effective rate is based on the three month EURIBOR or zero, whichever is higher, plus an applicable margin. |
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