Key Highlights

  • Net investment income was USD 328 million, down from USD 338 million, on total investment income of USD 763 million.
  • Net increase in stockholders' equity from operations was USD 319 million, or USD 0.44 per share, versus USD 0.57.
  • Net asset value per share stood at USD 19.31, compared with USD 19.94 at the start of 2026.
  • A definitive agreement values MidCap Financial Investment at about USD 2.6 billion, or USD 10.88 per share.

Income Edges Lower

Ares Capital (NASDAQ:ARCC) filed its third-quarter report on Tuesday showing total investment income of USD 763 million, down from USD 782 million. Expenses were USD 429 million against USD 433 million, and net investment income was USD 328 million against USD 338 million. Over nine months, net investment income rose to USD 1,085 million from USD 1,045 million, and per-share net investment income was flat at USD 1.51.

Net realized and unrealized results turned slightly negative at USD 7 million in the quarter, compared with a USD 66 million gain a year earlier, as realized losses of USD 50 million outweighed unrealized gains of USD 43 million. Nine-month net increase in stockholders' equity from operations was USD 582 million, or USD 0.81 per share, against USD 1.45.

Dividends of USD 0.48 per share were declared in each quarter this year, totaling USD 1.44 over nine months, unchanged from the prior year.

Portfolio and Balance Sheet

Total investments were USD 29,213 million at fair value, and net assets were USD 13,946 million. About 70% of investments at fair value paid variable rates, 13% paid fixed rates and 1% was on non-accrual. Software and Services represented 21.6% of the portfolio, down from 23.8% at year-end, while the investment in IHAM represented 10.4%, up from 8.3%.

The filing shows an interest rate sensitivity table in which a 100 basis point rise adds USD 77 million to annualized net income and a 100 basis point fall subtracts the same amount. The company did not repurchase shares in the first nine months.

The MidCap Financial Transaction

On Oct. 26 the company agreed to acquire MidCap Financial Investment Corporation for a combination of cash and stock. At the Oct. 26 close, the implied value was about USD 2.6 billion, or USD 10.88 per MidCap share, made up of USD 1.21 in cash and USD 9.67 in implied stock value across 82,372,628 shares. The cash portion is paid by Ares Capital Management, the company's adviser.

The exchange ratio is set shortly before closing using net asset value per share and the closing price, so the number of shares issued is not yet known. Completion requires approval from a majority of MidCap's stockholders and Nasdaq listing approval for the new shares. The company's filing describes closing timing as the first half of 2027 and notes that existing holders face dilution of their percentage ownership.

Items to Follow

Tracking points include net asset value per share against USD 19.31, non-accrual levels against 1%, and the MidCap shareholder vote and exchange ratio.

Two derivative actions filed in the Southern District of New York, on May 26 and Aug. 14, allege excessive advisory fees under Section 36(b) of the Investment Company Act. The adviser disputes the claims, and the filing says the cases are at an early stage.