Ares Capital Corporation

02/04/2026 | Press release | Distributed by Public on 02/04/2026 05:20

Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The information contained in this section should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this Annual Report. In addition, some of the statements in this Annual Report (including in the following discussion) constitute forward-looking statements, which relate to future events or the future performance or financial condition of Ares Capital Corporation (the "Company," "Ares Capital," "we," "us," or "our"). The forward-looking statements contained in this report involve a number of risks and uncertainties, including statements concerning:
•our, or our portfolio companies', future business, operations, operating results or prospects;
•the return or impact of current and future investments;
•the impact of a protracted decline in the liquidity of credit markets on our business;
•changes in the general economy, including those caused by tariffs and trade disputes with other countries, changes in inflation and risk of recession;
•fluctuations in global interest rates;
•the impact of changes in laws or regulations (including the interpretation thereof), including tax laws, governing our operations or the operations of our portfolio companies or the operations of our competitors;
•the valuation of our investments in portfolio companies, particularly those having no liquid trading market;
•our ability to recover unrealized losses;
•market conditions and our ability to access different debt markets and additional debt and equity capital and our ability to manage our capital resources effectively;
•our contractual arrangements and relationships with third parties;
•political and regulatory conditions that contribute to uncertainty and market volatility including the impact of any prolonged U.S. government shutdown as well as the legislative, regulatory, trade, immigration and other policies associated with the current U.S. presidential administration;
•the impact of supply chain constraints on our portfolio companies and the global economy;
•uncertainty surrounding global financial stability;
•ongoing conflicts in the Middle East, recent U.S. military action in Venezuela, and the Russia-Ukraine war, including the potential for volatility in energy prices and other commodities and their impact on the industries in which we invest;
•the disruption of global shipping activities;
•the financial condition of our current and prospective portfolio companies and their ability to achieve their objectives;
•the impact of information technology system failures, data security breaches, data privacy compliance, network disruptions, and cybersecurity attacks;
•the impact of global health crises on our or our portfolio companies' business and the U.S. and global economy;
•our ability to anticipate and identify evolving market expectations with respect to environmental, social and governance matters, including the environmental impacts of our portfolio companies' supply chain and operations;
•our ability to successfully complete and integrate any acquisitions;
•the outcome and impact of any litigation or regulatory proceeding;
•the adequacy of our cash resources and working capital;
•the timing, form and amount of any dividend distributions;
•the timing of cash flows, if any, from the operations of our portfolio companies; and
•the ability of our investment adviser to locate suitable investments for us and to monitor and administer our investments.
We use words such as "anticipates," "believes," "expects," "intends," "projects," "seeks," "estimates," "will," "should," "could," "would," "likely," "may" and similar expressions to identify forward-looking statements, although not all forward-looking statements include these words. You should not place undue reliance on these forward-looking statements, and our actual results and condition could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in "Risk Factors" and the other information included in this Annual Report.
We have based the forward-looking statements included in this Annual Report on information available to us as of the filing date of this Annual Report, and we assume no obligation to update any such forward-looking statements. Although we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise, you are advised to consult any additional disclosures that we may make directly to you or through reports that we have filed or in the future may file with the Securities and Exchange Commission (the "SEC"), including annual reports on Form 10-K, registration statements on Form N-2, quarterly reports on Form 10-Q and current reports on Form 8-K.
OVERVIEW
We are a specialty finance company that is a closed-end, non-diversified management investment company incorporated in Maryland. We have elected to be regulated as a business development company ("BDC") under the Investment Company Act of 1940, as amended (together with the rules and regulations promulgated thereunder, the "Investment Company Act").
We are externally managed by Ares Capital Management LLC ("Ares Capital Management" or our "investment adviser"), a subsidiary of Ares Management Corporation ("Ares Management"), a publicly traded, leading global alternative investment manager, pursuant to our investment advisory and management agreement. Ares Operations LLC ("Ares Operations" or our "administrator"), a subsidiary of Ares Management, provides certain administrative and other services necessary for us to operate.
Our investment objective is to generate both current income and capital appreciation through debt and equity investments. We invest primarily in first lien senior secured loans (including "unitranche" loans, which are loans that combine both senior and subordinated loans, generally in a first lien position) and second lien senior secured loans. In addition to senior secured loans, we also invest in subordinated loans (sometimes referred to as mezzanine debt) and preferred equity.
To a lesser extent, we also make common equity investments, which have generally been non-control equity investments of less than $20 million (usually in conjunction with a concurrent debt investment). However, we may increase the size or change the nature of these investments.
Since our initial public offering ("IPO") on October 8, 2004 through December 31, 2025, our exited investments resulted in an asset level realized gross internal rate of return to us of approximately 13% (based on original cash invested, net of syndications, of approximately $55.7 billion and total proceeds from such exited investments of approximately $71.7 billion). Internal rate of return is the discount rate that makes the net present value of all cash flows related to a particular investment equal to zero. Internal rate of return is gross of expenses related to investments as these expenses are not allocable to specific investments. Investments are considered to be exited when the original investment objective has been achieved through the receipt of cash and/or non-cash consideration upon the repayment of a debt investment or sale of an investment or through the determination that no further consideration was collectible and, thus, a loss may have been realized.
Additionally, since our IPO on October 8, 2004 through December 31, 2025, our realized gains have exceeded our realized losses by approximately $1.0 billion (excluding a one-time gain on the acquisition of Allied Capital Corporation in April 2010 (the "Allied Acquisition"), income tax expense on net realized gains, and realized gains/losses from the extinguishment of debt and other transactions). For the same time period, our average annualized net realized gain rate was approximately 0.8% (excluding a one-time gain on the Allied Acquisition, income tax expense on net realized gains, and
realized gains/losses from the extinguishment of debt and other transactions). Net realized gain/loss rates for a particular period are the amount of net realized gains/losses during such period divided by the average quarterly investments at amortized cost in such period.
Information included herein regarding internal rates of return, realized gains and losses and annualized net realized gain rates are historical results relating to our past performance and are not necessarily indicative of future results, the achievement of which cannot be assured.
As a BDC, we are required to comply with certain regulatory requirements. For instance, we generally have to invest at least 70% of our total assets in "qualifying assets," including securities and indebtedness of private U.S. companies and certain public U.S. companies, cash, cash equivalents, U.S. government securities and high-quality debt investments that mature in one year or less. We also may invest up to 30% of our portfolio in non-qualifying assets, as permitted by the Investment Company Act. Specifically, as part of this 30% basket, we may invest in entities that are not considered "eligible portfolio companies" (as defined in the Investment Company Act), including companies located outside of the United States, entities that are operating pursuant to certain exceptions under the Investment Company Act, and publicly traded entities whose public equity market capitalization exceeds the levels provided for under the Investment Company Act. In addition, we, our investment adviser and certain of our affiliates have received an order from the SEC that permits us and other BDCs and registered closed-end management investment companies managed by Ares Management to co-invest in portfolio companies with each other and with other affiliated investment entities (the "Co-Investment Exemptive Order"). As required by the Co-Investment Exemptive Order, we have adopted, and our board of directors has approved, policies and procedures reasonably designed to ensure compliance with the terms of the Co-Investment Exemptive Order, and our investment adviser and our Chief Compliance Officer will provide reporting to our board of directors. Co-investments made under the Co-Investment Exemptive Order are subject to compliance with certain conditions and other requirements, which could limit our ability to participate in co-investment transactions. As a result of investments permitted by the Co-Investment Exemptive Order, there could be significant overlap in our investment portfolio and the investment portfolio of affiliated Ares Management entities that can rely on the Co-Investment Exemptive Order and have an investment objective similar to ours. We may also otherwise co-invest with funds managed by Ares Management or any of its downstream affiliates, subject to compliance with existing regulatory guidance, applicable regulations and our investment adviser's allocation policy.
We have elected to be treated as a regulated investment company ("RIC") under the Internal Revenue Code of 1986, as amended (the "Code"), and operate in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, we must, among other requirements, meet certain source-of-income and asset diversification requirements and timely distribute to our stockholders generally at least 90% of our investment company taxable income, as defined by the Code, for each year. Pursuant to this election, we generally will not have to pay U.S. federal corporate-level taxes on any income that we distribute to our stockholders provided that we satisfy those requirements.
MACROECONOMIC ENVIRONMENT
In 2025, U.S. leveraged corporate credit markets delivered positive total returns, supported by growing U.S. gross domestic product and consumer spending, stable inflation and historically low unemployment. These tailwinds were partially offset by slower job growth and increased uncertainty related to tariff policies and risks from various geopolitical developments. Although future economic growth in the U.S. is expected to slow relative to 2024 levels, the U.S debt and equity markets have shown strength as the Federal Reserve's anticipated accommodative monetary policies are expected to support overall economic activity.
PORTFOLIO AND INVESTMENT ACTIVITY
Our investment activity for the years ended December 31, 2025 and 2024 is presented below.
For the Years Ended December 31,
(dollar amounts in millions) 2025 2024
New investment commitments(1):
New portfolio companies $ 7,185 $ 4,418
Existing portfolio companies 8,590 10,663
Total new investment commitments(2) $ 15,775 $ 15,081
Less:
Investment commitments exited(3) (12,106) (10,103)
Net investment commitments $ 3,669 $ 4,978
Principal amount of investments funded:
First lien senior secured loans(4) $ 11,593 $ 11,269
Second lien senior secured loans 254 172
Subordinated certificates of the SDLP(5) 196 211
Senior subordinated loans 428 281
Preferred equity 187 148
Ivy Hill Asset Management, L.P.(6) 812 412
Other equity 394 374
Total $ 13,864 $ 12,867
Principal amount of investments sold or repaid:
First lien senior secured loans(4) $ 9,096 $ 6,054
Second lien senior secured loans 723 2,120
Subordinated certificates of the SDLP(5) 362 271
Senior subordinated loans 168 241
Preferred equity 513 298
Ivy Hill Asset Management, L.P.(6) 282 474
Other equity 446 188
Total $ 11,590 $ 9,646
Number of new investment commitments(7) 321 293
Average new investment commitment amount $ 49 $ 51
Weighted average term for new investment commitments (in months) 71 74
Percentage of new investment commitments at floating rates 93 % 94 %
Percentage of new investment commitments at fixed rates 4 % 3 %
Weighted average yield of debt and other income producing securities(8):
Funded during the period at amortized cost 9.7 % 10.6 %
Funded during the period at fair value(9) 9.7 % 10.7 %
Exited or repaid during the period at amortized cost 10.1 % 11.8 %
Exited or repaid during the period at fair value(9) 10.1 % 12.0 %
_______________________________________________________________________________
(1)New investment commitments include new agreements to fund revolving loans or delayed draw loans. See Note 7 to our consolidated financial statements for the year ended December 31, 2025 for more information on our commitments to fund revolving loans or delayed draw loans.
(2)Includes both funded and unfunded commitments. Of these new investment commitments, we funded $11.4 billion and $11.8 billion for the years ended December 31, 2025 and 2024, respectively.
(3)Includes both funded and unfunded commitments. For the years ended December 31, 2025 and 2024, investment commitments exited included exits of unfunded commitments of $1.7 billion and $1.3 billion, respectively.
(4)For the years ended December 31, 2025 and 2024, net fundings (repayments) of first lien secured revolving loans were $20 million and $(68) million, respectively.
(5)See "Senior Direct Lending Program" below and Note 4 to our consolidated financial statements for the year ended December 31, 2025 for more information on the SDLP (as defined below).
(6)Includes our subordinated loan to and equity investments in IHAM (as defined below), as applicable. See "Ivy Hill Asset Management, L.P." below and Note 4 to our consolidated financial statements for the year ended December 31, 2025 for more information on IHAM.
(7)Number of new investment commitments represents each commitment to a particular portfolio company or a commitment to multiple companies as part of an individual transaction (e.g., the purchase of a portfolio of investments).
(8)"Weighted average yield of debt and other income producing securities" is computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount or premium earned on accruing debt and other income producing securities (including the annualized amount of the regular dividend received by us related to our equity investment in IHAM during the most recent quarter end, as applicable), divided by (b) the total accruing debt and other income producing securities at amortized cost or at fair value (including the amortized cost or fair value of our equity investment in IHAM as applicable), as applicable.
(9)Represents fair value for investments in the portfolio as of the most recent prior quarter end, if applicable.
As of December 31, 2025 and 2024, our investments consisted of the following:
As of December 31,
2025 2024
(in millions) Amortized Cost(1) Fair Value Amortized Cost(1) Fair Value
First lien senior secured loans(2) $ 18,103 $ 17,858 $ 15,519 $ 15,179
Second lien senior secured loans 1,558 1,487 1,935 1,847
Subordinated certificates of the SDLP(3) 1,103 1,117 1,263 1,192
Senior subordinated loans 1,690 1,585 1,384 1,351
Preferred equity 2,597 2,475 2,667 2,649
Ivy Hill Asset Management, L.P.(4) 2,231 2,434 1,701 1,915
Other equity 1,968 2,529 1,905 2,587
Total $ 29,250 $ 29,485 $ 26,374 $ 26,720
_______________________________________________________________________________
(1)The amortized cost represents the original cost adjusted for any accretion of discounts, amortization of premiums and payment-in-kind ("PIK") interest or dividends.
(2)First lien senior secured loans include certain loans that we classify as "unitranche" loans. The total amortized cost and fair value of the loans that we classified as "unitranche" loans were $11.3 billion and $11.2 billion, respectively, as of December 31, 2025, and $8.8 billion and $8.6 billion, respectively, as of December 31, 2024.
(3)The proceeds from these certificates were applied to co-investments with Varagon Capital Partners ("Varagon") and its clients to fund first lien senior secured loans to 39 and 20 different borrowers as of December 31, 2025 and 2024, respectively.
(4)Includes our subordinated loan to and equity investments in IHAM, as applicable.
We have commitments to fund various revolving and delayed draw senior secured and subordinated loans, including commitments to fund which are at (or substantially at) our discretion. Our commitment to fund delayed draw loans is triggered
upon the satisfaction of certain pre-negotiated terms and conditions. Generally, the most significant and uncertain term requires the borrower to satisfy a specific use of proceeds covenant. The use of proceeds covenant typically requires the borrower to use the additional loans for the specific purpose of a permitted acquisition or permitted investment, for example. In addition to the use of proceeds covenant, the borrower is generally required to satisfy additional negotiated covenants (including specified leverage levels). We are also party to subscription agreements to fund equity investments. See Note 7 to our consolidated financial statements for the year ended December 31, 2025 for more information on our unfunded commitments, including commitments to issue letters of credit, related to certain of our portfolio companies.
The weighted average yields at amortized cost and fair value of the following portions of our portfolio as of December 31, 2025 and 2024 were as follows:
As of December 31,
2025 2024
Amortized Cost Fair Value Amortized Cost Fair Value
Debt and other income producing securities(1) 10.3 % 10.3 % 11.1 % 11.2 %
Total portfolio(2) 9.4 % 9.3 % 10.0 % 9.9 %
First lien senior secured loans(3) 9.1 % 9.2 % 9.9 % 10.1 %
Second lien senior secured loans(3) 10.2 % 10.7 % 12.1 % 12.7 %
Subordinated certificates of the SDLP(3)(6) 13.2 % 13.0 % 12.4 % 13.2 %
Senior subordinated loans(3) 10.5 % 11.0 % 11.9 % 12.2 %
Ivy Hill Asset Management L.P.(4) 17.2 % 15.3 % 16.7 % 14.8 %
Other income producing equity securities(5) 11.0 % 11.3 % 11.3 % 11.5 %
_______________________________________________________________________________
(1)"Weighted average yields on debt and other income producing securities" are computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount or premium earned on accruing debt and other income producing securities (including the annualized amount of the regular dividend received by us related to our equity investment in IHAM during the most recent quarter end), divided by (b) the total accruing debt and other income producing securities at amortized cost or at fair value (including the amortized cost or fair value of our equity investment in IHAM as applicable), as applicable.
(2)"Weighted average yields on total portfolio" are computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount or premium earned on accruing debt and other income producing securities (including the annualized amount of the regular dividend received by us related to our equity investment in IHAM during the most recent quarter end), divided by (b) total investments at amortized cost or at fair value, as applicable.
(3)"Weighted average yields" of investments are computed as (a) the annual stated interest rate or yield earned plus the net annual amortization of original issue discount and market discount or premium earned on the relevant accruing investments, divided by (b) the total relevant investments at amortized cost or at fair value, as applicable.
(4)Represents the yield on our equity investment in IHAM, which is computed as (a) the annualized amount of the regular dividend received by us related to our equity investment in IHAM during the most recent quarter end, divided by (b) the amortized cost or fair value of our equity investment in IHAM, as applicable.
(5)"Weighted average yield on other income producing equity securities" is computed as (a) the yield earned on the relevant income producing equity securities, divided by (b) the total relevant income producing equity securities at amortized cost or fair value, as applicable.
(6)The proceeds from these certificates were applied to co-investments with Varagon and its clients to fund first lien senior secured loans.
Ares Capital Management employs an investment rating system to categorize our investments. In addition to various risk management and monitoring tools, our investment adviser grades the credit risk of all investments on a scale of 1 to 4 no less frequently than quarterly. This system is intended primarily to reflect the underlying risk of a portfolio investment relative to our initial cost basis in respect of such portfolio investment (i.e., at the time of origination or acquisition), although it may also take into account under certain circumstances the performance of the portfolio company's business, the collateral coverage
of the investment and other relevant factors. The grade of a portfolio investment may be reduced or increased over time. The following is a description of each investment grade:
Investment grade Description
4 Involves the least amount of risk to our initial cost basis. The trends and risk factors for this investment since origination or acquisition are generally favorable, which may include the performance of the portfolio company or a potential exit.
3 Involves a level of risk to our initial cost basis that is similar to the risk to our initial cost basis at the time of origination or acquisition. This portfolio company is generally performing as expected and the risk factors to our ability to ultimately recoup the cost of our investment are neutral to favorable. All investments or acquired investments in new portfolio companies are initially assessed a grade of 3.
2 Indicates that the risk to our ability to recoup the initial cost basis of such investment has increased materially since origination or acquisition, including as a result of factors such as declining performance and non-compliance with debt covenants; however, payments are generally not more than 120 days past due. For investments graded 2, our investment adviser enhances its level of scrutiny over the monitoring of such portfolio company.
1 Indicates that the risk to our ability to recoup the initial cost basis of such investment has substantially increased since origination or acquisition, and the portfolio company likely has materially declining performance. For debt investments with an investment grade of 1, most or all of the debt covenants are out of compliance and payments are substantially delinquent. For investments graded 1, it is anticipated that we will not recoup our initial cost basis and may realize a substantial loss of our initial cost basis upon exit. For investments graded 1, our investment adviser enhances its level of scrutiny over the monitoring of such portfolio company.
Set forth below is the grade distribution of our portfolio companies as of December 31, 2025 and 2024:
As of December 31,
2025 2024
(dollar amounts in millions) Fair Value % Number of
Companies 		% Fair Value % Number of
Companies 		%
Grade 4 $ 5,040 17.1 % 65 10.8 % $ 4,792 17.9 % 64 11.6 %
Grade 3 23,322 79.1 486 80.6 21,156 79.2 432 78.6
Grade 2 675 2.3 27 4.5 513 1.9 31 5.6
Grade 1 448 1.5 25 4.1 259 1.0 23 4.2
Total $ 29,485 100.0 % 603 100.0 % $ 26,720 100.0 % 550 100.0 %
As of December 31, 2025 and 2024, the weighted average grade of the investments in our portfolio at fair value was 3.1 and 3.1, respectively.
As of December 31, 2025 and 2024, loans on non-accrual status represented 1.8% of the total investments at amortized cost (or 1.2% at fair value) and 1.7% at amortized cost (or 1.0% at fair value), respectively.
Ivy Hill Asset Management, L.P.
Ivy Hill Asset Management, L.P. ("IHAM"), our wholly owned portfolio company, is an asset manager and an SEC-registered investment adviser. As of December 31, 2025, IHAM had assets under management of approximately $14.6 billion. As of December 31, 2025, IHAM managed 23 vehicles (the "IHAM Vehicles"). IHAM earns fee income from managing the IHAM Vehicles and has also invested in certain of these vehicles as part of its business strategy. The amortized cost of IHAM's total investments as of December 31, 2025 and 2024 was $3,190 million and $2,237 million, respectively. For the years ended December 31, 2025 and 2024, IHAM had management and incentive fee income of $52 million and $53 million, respectively, and other investment-related income of $282 million and $344 million, respectively, which included net realized gains or losses on investments and other transactions.
The amortized cost and fair value of our investments in IHAM as of December 31, 2025 and 2024 were as follows:
As of December 31,
2025 2024
(in millions) Amortized Cost Fair Value Amortized Cost Fair Value
Subordinated loan(1)
$ 530 $ 530 $ - $ -
Equity
1,701 1,904 1,701 1,915
Total investment in IHAM $ 2,231 $ 2,434 $ 1,701 $ 1,915
_______________________________________________________________________________
(1)We have provided a commitment to fund up to $750 million and $500 million, as of December 31, 2025 and 2024, respectively, to IHAM, with availability of funding solely at our discretion.
The interest income and dividend income that we earned from IHAM for the years ended December 31, 2025 and 2024 were as follows:
For the Years Ended December 31,
(in millions) 2025 2024
Interest income
$ 8 $ 2
Dividend income
$ 292 $ 285
From time to time, IHAM or certain IHAM Vehicles may purchase investments from, or sell investments to, us. For any such sales or purchases by the IHAM Vehicles to or from us, the IHAM Vehicle must obtain approval from third parties unaffiliated with us or IHAM, as applicable. During the years ended December 31, 2025 and 2024, IHAM or certain of the IHAM Vehicles purchased $3.7 billion and $759 million, respectively, of loans from us. For the years ended December 31, 2025 and 2024, we recognized approximately $0 million and $1 million of net realized losses, respectively, from these sales. During the year ended December 31, 2025, neither IHAM nor any IHAM Vehicles sold any investments to us. During the year ended December 31, 2024, IHAM or certain IHAM vehicles sold $32 million of investments to us.
The yields at amortized cost and fair value of our investments in IHAM as of December 31, 2025 and 2024 were as follows:
As of December 31,
2025 2024
Amortized Cost Fair Value Amortized Cost Fair Value
Subordinated loan
10.3 % 10.3 % - % - %
Equity(1)
17.2 % 15.3 % 16.7 % 14.8 %
_______________________________________________________________________________
(1)Represents the yield on our equity investment in IHAM, which is computed as (a) the annualized amount of the regular dividend received by us related to our equity investment in IHAM during the most recent quarter end, divided by (b) the amortized cost or fair value of our equity investment in IHAM, as applicable.
Selected Financial Information
Pursuant to Rule 4-08(g) of Regulation S-X, selected financial information of IHAM, in conformity with U.S. generally accepted accounting principles ("GAAP"), as of and for the years ended December 31, 2025 and 2024 are presented below.
In conformity with GAAP, IHAM is required to consolidate entities in which IHAM has a direct or indirect controlling financial interest based on either a variable interest model or voting interest model, which include certain of the IHAM Vehicles (the "Consolidated IHAM Vehicles"). As such, for GAAP purposes only, IHAM consolidates (a) entities in which it holds a majority voting interest or has majority ownership and control over the operational, financial and investing decisions of that entity and (b) entities that it concludes are variable interest entities in which IHAM has more than insignificant economic interest and power to direct the activities that most significantly impact the entities, and for which IHAM is deemed to be the primary beneficiary.
When IHAM consolidates an IHAM Vehicle for GAAP purposes only, IHAM reflects the assets, liabilities, revenues and expenses of the Consolidated IHAM Vehicles on a gross basis, including the economic interests held by third-party investors in the Consolidated IHAM Vehicles as debt obligations, subordinated notes or non-controlling interests, in the consolidated IHAM financials below. All of the revenues earned by IHAM as the investment manager of the Consolidated IHAM Vehicles are eliminated in GAAP consolidation. However, because the eliminated amounts are earned from and funded by third-party investors, the GAAP consolidation of an IHAM Vehicle does not impact the net income or loss attributable to IHAM. As a result, we believe an assessment of IHAM's business and the impact to our investment in IHAM is best viewed on a stand-alone basis as reflected in the first column in the tables below.
As of December 31, 2025
(in millions) IHAM Consolidated IHAM Vehicles(1) Eliminations Consolidated
Selected Balance Sheet Information:
Assets
Investments at fair value(2) $ 3,108 $ 11,504 $ (3,013) $ 11,599
Cash and cash equivalents 10 597 - 607
Other assets 93 146 (82) 157
Total assets $ 3,211 $ 12,247 $ (3,095) $ 12,363
Liabilities
Debt $ 893 $ 8,622 $ - $ 9,515
Subordinated note from ARCC 531 - - 531
Subordinated notes(3) - 1,277 (941) 336
Other liabilities 20 311 (18) 313
Total liabilities 1,444 10,210 (959) 10,695
Equity
Contributed capital 1,701 - - 1,701
Accumulated earnings 148 - - 148
Net unrealized losses on investments and foreign currency transactions(4) (82) - - (82)
Non-controlling interests in Consolidated IHAM Vehicles(5)
- 2,037 (2,136) (99)
Total equity 1,767 2,037 (2,136) 1,668
Total liabilities and equity $ 3,211 $ 12,247 $ (3,095) $ 12,363
As of December 31, 2024
(in millions) IHAM Consolidated IHAM Vehicles(1) Eliminations Consolidated
Selected Balance Sheet Information:
Assets
Investments at fair value(2) $ 2,160 $ 8,098 $ (2,086) $ 8,172
Cash and cash equivalents 9 967 - 976
Other assets 60 122 (54) 128
Total assets $ 2,229 $ 9,187 $ (2,140) $ 9,276
Liabilities
Debt $ 406 $ 6,550 $ - $ 6,956
Subordinated notes(3) - 1,025 (714) 311
Other liabilities 16 266 (13) 269
Total liabilities 422 7,841 (727) 7,536
Equity
Contributed capital 1,700 - - 1,700
Accumulated earnings 186 - - 186
Net unrealized losses on investments and foreign currency transactions(4) (79) - - (79)
Non-controlling interests in Consolidated IHAM Vehicles(5)
- 1,346 (1,413) (67)
Total equity 1,807 1,346 (1,413) 1,740
Total liabilities and equity $ 2,229 $ 9,187 $ (2,140) $ 9,276
____________________________________
(1)Consolidated for GAAP purposes only.
(2)The determination of such fair value is determined in accordance with IHAM's valuation process (separate and apart from our valuation process described elsewhere herein). The amortized cost of IHAM's total investments as of December 31, 2025 and 2024 was $3,190 million and $2,237 million, respectively. The amortized cost of the total investments of IHAM on a consolidated basis as of December 31, 2025 and 2024 was $11,766 million and $8,343 million, respectively.
(3)Subordinated notes generally represent the most junior capital in certain of the Consolidated IHAM Vehicles and effectively represent equity in such vehicles.
(4)As of December 31, 2025 and 2024, net unrealized losses of $85 million and $70 million, respectively, have been eliminated upon consolidation and the elimination is included in "non-controlling interests in Consolidated IHAM Vehicles" in the selected balance sheet information.
(5)Non-controlling interests in Consolidated IHAM Vehicles includes net unrealized depreciation in the Consolidated IHAM Vehicles of $167 million and $171 million as of December 31, 2025 and 2024, respectively.
For the Year Ended December 31, 2025
(in millions) IHAM Consolidated IHAM Vehicles(1) Eliminations Consolidated
Selected Statement of Operations Information:
Revenues
Investment income $ 310 $ 930 $ (304) $ 936
Management fees and other income 52 11 (51) 12
Total revenues 362 941 (355) 948
Expenses
Interest expense 64 487 - 551
Distributions to subordinated notes - 147 (105) 42
Management fees and other expenses 17 59 (51) 25
Total expenses 81 693 (156) 618
Net operating income 281 248 (199) 330
Net realized losses on investments and foreign currency (28) (99) 18 (109)
Net realized gains (losses) on extinguishment of debt - 21 (23) (2)
Net unrealized gains (losses) on investments, foreign currency and other transactions (3) (13) 16 -
Total net realized and unrealized losses on investments, foreign currency and other transactions (31) (91) 11 (111)
Net income 250 157 (188) 219
Less: Net income (loss) attributable to non-controlling interests in Consolidated IHAM Vehicles - 157 (188) (31)
Net income attributable to Ivy Hill Asset Management, L.P. $ 250 $ - $ - $ 250
For the Year Ended December 31, 2024
(in millions) IHAM Consolidated IHAM Vehicles(1) Eliminations Consolidated
Selected Statement of Operations Information:
Revenues
Investment income $ 344 $ 1,014 $ (337) $ 1,021
Management fees and other income 53 12 (50) 15
Total revenues 397 1,026 (387) 1,036
Expenses
Interest expense 37 564 - 601
Distributions to subordinated notes - 207 (152) 55
Management fees and other expenses 15 61 (50) 26
Total expenses 52 832 (202) 682
Net operating income 345 194 (185) 354
Net realized gains (losses) on investments and foreign currency - (132) (4) (136)
Net realized gain on extinguishment of debt - 1 2 3
Net unrealized gains (losses) on investments, foreign currency and other transactions (64) 62 57 55
Total net realized and unrealized losses on investments, foreign currency and other transactions (64) (69) 55 (78)
Net income 281 125 (130) 276
Less: Net income (loss) attributable to non-controlling interests in Consolidated IHAM Vehicles - 125 (130) (5)
Net income attributable to Ivy Hill Asset Management, L.P. $ 281 $ - $ - $ 281
____________________________________
(1)Consolidated for GAAP purposes only.
Senior Direct Lending Program
We have established a joint venture with Varagon to make certain first lien senior secured loans, including certain stretch senior and unitranche loans, primarily to U.S. middle-market companies. The joint venture is called the Senior Direct Lending Program, LLC (d/b/a the "Senior Direct Lending Program" or the "SDLP"). In July 2016, we and Varagon and its clients completed the initial funding of the SDLP. We, and other BDCs, registered closed-end management investment companies and other affiliated investment entities managed by our investment adviser or its affiliates, may directly co-invest with the SDLP in accordance with the terms of the Co-Investment Exemptive Order. The SDLP is capitalized as transactions are completed and all portfolio decisions and generally all other decisions in respect of the SDLP, including co-investment transactions made by the SDLP in accordance with the terms of the Co-Investment Order, must be approved by an investment committee of the SDLP consisting of representatives of ours and Varagon (with approval from a representative of each required).
We provide capital to the SDLP in the form of subordinated certificates (the "SDLP Certificates"), and Varagon and its clients provide capital to the SDLP in the form of senior notes, intermediate funding notes and the SDLP Certificates. As of December 31, 2025, we and a client of Varagon owned 87.5% and 12.5%, respectively, of the outstanding SDLP Certificates.
As of December 31, 2025 and 2024, we and Varagon and its clients had agreed to make capital available to the SDLP of $6.2 billion and $6.2 billion, respectively, in the aggregate, of which $1.4 billion and $1.4 billion, respectively, is to be made available from us. This capital will only be committed to the SDLP upon approval of transactions by the investment committee of the SDLP. Below is a summary of the funded capital and unfunded capital commitments of the SDLP.
As of December 31,
(in millions) 2025 2024
Total capital funded to the SDLP(1) $ 4,606 $ 5,054
Total capital funded to the SDLP by the Company(1) $ 1,285 $ 1,310
Total unfunded capital commitments to the SDLP(2) $ 259 $ 489
Total unfunded capital commitments to the SDLP by the Company(2) $ 60 $ 119
___________________________________________________________________________
(1)At principal amount.
(2)These commitments to fund delayed draw loans have been approved by the investment committee of the SDLP and will be funded if and when conditions to funding such delayed draw loans are met.
The SDLP Certificates pay a coupon equal to Secured Overnight Financing Rate ("SOFR") plus 8.0%and also entitle the holders thereof to receive a portion of the excess cash flow from the loan portfolio, after expenses, which may result in a return to the holders of the SDLP Certificates that is greater than the stated coupon. The SDLP Certificates are junior in right of payment to the senior notes and intermediate funding notes.
The amortized cost and fair value of our SDLP Certificates and our yield on our investment in the SDLP Certificates at amortized cost and fair value as of December 31, 2025 and 2024 were as follows:
As of December 31,
2025 2024
(dollar amounts in millions) Amortized Cost Fair Value Amortized Cost Fair Value
Investment in the SDLP Certificates $ 1,103 $ 1,117 $ 1,263 $ 1,192
Yield on the investment in the SDLP Certificates 13.2 % 13.0 % 12.4 % 13.2 %
The interest income and capital structuring service fees and other income earned with respect to our investment in the SDLP Certificates for the years ended December 31, 2025 and 2024 were as follows:
For the Years Ended December 31,
(in millions) 2025 2024
Interest income
$ 145 $ 173
Capital structuring service fees and other income
$ 9 $ 17
As of December 31, 2025 and 2024, the SDLP portfolio was comprised of first lien senior secured loans to primarily U.S. middle-market companies in industries similar to the companies in our portfolio. As of December 31, 2025, none of the loans in the SDLP portfolio were on non-accrual status. As of December 31, 2024, two of the loans in the SDLP portfolio were on non-accrual status. Below is a summary of the SDLP portfolio as of December 31, 2025 and 2024:
As of December 31,
(dollar amounts in millions) 2025 2024
Total first lien senior secured loans(1)(2) $ 4,297 $ 4,759
Weighted average yield on first lien senior secured loans(3) 8.5 % 8.9 %
Largest loan to a single borrower(1) $ 413 $ 400
Total of five largest loans to borrowers(1) $ 1,719 $ 1,692
Number of borrowers in the SDLP 39 20
Commitments to fund delayed draw loans(4) $ 259 $ 489
_______________________________________________________________________________
(1)At principal amount.
(2)First lien senior secured loans include certain loans that the SDLP classifies as "unitranche" loans. As of December 31, 2025 and 2024, the total principal amount of loans in the SDLP portfolio that the SDLP classified as "unitranche" loans was $2,844 million and $3,937 million, respectively.
(3) Computed as (a) the annual stated interest rate on accruing first lien senior secured loans, divided by (b) total first lien senior secured loans at principal amount.
(4)These commitments to fund delayed draw loans have been approved by the investment committee of the SDLP and will be funded if and when conditions to funding such delayed draw loans are met.
Selected financial information of the SDLP, in conformity with GAAP, as of December 31, 2025 and 2024 and for the years ended December 31, 2025 and 2024 is presented below:
As of December 31,
(in millions) 2025 2024
Selected Balance Sheet Information:
Investments at fair value (amortized cost of $4,305 and $4,591, respectively)
$ 4,159 $ 4,390
Other assets 128 449
Total assets $ 4,287 $ 4,839
Senior notes $ 3,024 $ 3,428
Intermediate funding notes 113 130
Other liabilities 94 124
Total liabilities 3,231 3,682
Subordinated certificates and members' capital 1,056 1,157
Total liabilities and members' capital $ 4,287 $ 4,839
For the Years Ended December 31,
(in millions) 2025 2024
Selected Statement of Operations Information:
Total investment income $ 406 $ 541
Interest expense 225 292
Other expenses 16 17
Total expenses 241 309
Net investment income 165 232
Net realized and unrealized losses on investments (45) (157)
Net increase in members' capital resulting from operations $ 120 $ 75
Additional supplemental financial information for the SDLP is set forth in Exhibit 99.2 to this Form 10-K.
RESULTS OF OPERATIONS
For the years ended December 31, 2025 and 2024
Operating results for the years ended December 31, 2025 and 2024 were as follows:
For the Years Ended December 31,
(in millions) 2025 2024
Total investment income $ 3,052 $ 2,990
Total expenses 1,594 1,514
Net investment income before income taxes 1,458 1,476
Income tax expense, including excise taxes 43 40
Net investment income 1,415 1,436
Net realized losses (20) (88)
Net unrealized gains (losses) (96) 188
Realized loss on extinguishment of debt - (14)
Net increase in stockholders' equity resulting from operations $ 1,299 $ 1,522
Net income can vary substantially from period to period due to various factors, including acquisitions, the level of new investment commitments, the level of base interest rates and the recognition of realized gains and losses and unrealized appreciation and depreciation. As a result, comparisons of net increase in stockholders' equity resulting from operations may not be meaningful.
Investment Income
For the Years Ended December 31,
(in millions) 2025 2024
Interest income from investments $ 2,183 $ 2,162
Capital structuring service fees 185 172
Dividend income 591 594
Other income 93 62
Total investment income $ 3,052 $ 2,990
Interest income from investments for the year ended December 31, 2025 increased from the comparable period in 2024 primarily due to the increase in the average size of our portfolio, which was partially offset by declining base rates. The average size and weighted average yield of our portfolio at amortized cost for the years ended December 31, 2025 and 2024 were as follows:
For the Years Ended December 31,
(dollar amounts in millions) 2025 2024
Average size of portfolio(1) $ 27,685 $ 24,402
Weighted average yield on portfolio 10.0 % 11.2 %
_______________________________________________________________________________
(1) Includes non-interest earning investments.
Capital structuring service fees for the year ended December 31, 2025 increased from the comparable period in 2024 primarily due to an increase in new investment commitments. The new investment commitments and weighted average capital structuring service fee percentages for the years ended December 31, 2025 and 2024 were as follows:
For the Years Ended December 31,
(dollar amounts in millions) 2025 2024
New investment commitments(1) $ 13,337 $ 12,152
Weighted average capital structuring service fee percentage(1) 1.4 % 1.4 %
_______________________________________________________________________________
(1)Excludes $1.6 billion and $2.5 billion of new investment commitments sold to third-party lenders during the years ended December 31, 2025 and 2024, respectively. Excludes $812 million and $412 million of investment commitments to IHAM for the years ended December 31, 2025 and 2024, respectively.
Dividend income for the years ended December 31, 2025 and 2024 were as follows:
For the Years Ended December 31,
(in millions) 2025 2024
Dividend income received from IHAM $ 292 $ 285
Recurring dividend income 278 287
Non-recurring dividend income 21 22
Total dividend income $ 591 $ 594
Recurring dividend income for the year ended December 31, 2025 decreased from the comparable period in 2024 primarily due to a decrease in yielding preferred equity investments.
Operating Expenses
For the Years Ended December 31,
(in millions) 2025 2024
Interest and credit facility fees $ 793 $ 715
Base management fee 425 374
Income based fee 348 364
Capital gains incentive fee(1) (23) 18
Administrative and other fees 15 12
Other general and administrative 36 31
Total expenses $ 1,594 $ 1,514
_______________________________________________________________________________
(1)Accrued in accordance with GAAP as discussed below. As of December 31, 2025 and 2024, there was no capital gains incentive fee actually payable under our investment advisory and management agreement.
Interest and credit facility fees for the years ended December 31, 2025 and 2024 were comprised of the following:
For the Years Ended December 31,
(in millions) 2025 2024
Stated interest expense(1) $ 736 $ 665
Credit facility fees 24 23
Amortization of debt issuance costs 34 33
Net amortization of discount/premium on notes payable - (6)
Net gain on interest rate swaps accounted for as hedge instruments and the related hedged items (1) -
Total interest and credit facility fees $ 793 $ 715
________________________________________
(1)Includes the impact of the interest rate swaps.
Stated interest expense for the year ended December 31, 2025 increased from the comparable period in 2024 primarily due to the increase in the average principal amount of our outstanding debt. Average outstanding debt and weighted average stated interest rate on our outstanding debt for the years ended December 31, 2025 and 2024 were as follows:
For the Years Ended December 31,
(dollar amounts in millions) 2025 2024
Average outstanding debt $ 14,669 $ 12,860
Weighted average stated interest rate on outstanding debt(1) 4.7 % 5.1 %
________________________________________
(1)The weighted average stated interest rate on our outstanding debt includes the impact of interest rate swaps. See Note 6 to our consolidated financial statements for the year ended December 31, 2025 for more information on the interest rate swaps.
The base management fee for the year ended December 31, 2025 increased from the comparable period in 2024 primarily due to the increase in the average size of our portfolio.
The income based fee for the year ended December 31, 2025 decreased from the comparable period in 2024 primarily due to the pre-incentive fee net investment income, as defined in the investment advisory and management agreement, for the year ended December 31, 2025 being lower than in the comparable period in 2024.
For the year ended December 31, 2025, the reduction in the capital gains incentive fee accrued in accordance with GAAP was $23 million. For the year ended December 31, 2024, the capital gains incentive fee accrued in accordance with GAAP was $18 million. The capital gains incentive fee accrual for the year ended December 31, 2025 changed from the comparable period in 2024 primarily due to net losses on investments, foreign currency, other transactions and the extinguishment of debt of $116 million compared to net gains of $86 million for the comparable period in 2024. The capital gains incentive fee accrued under GAAP includes an accrual related to unrealized capital appreciation, whereas the capital gains incentive fee actually payable under our investment advisory and management agreement does not. There can be no assurance that such unrealized capital appreciation will be realized in the future. The accrual for any capital gains incentive fee under GAAP in a given period may result in an additional expense if such cumulative amount is greater than in the prior period or a reduction of previously recorded expense if such cumulative amount is less than in the prior period. If such cumulative amount is negative, then there is no accrual. As of December 31, 2025, there was $82 million of capital gains incentive fee accrued in accordance with GAAP. As of December 31, 2025, there was no capital gains incentive fee actually payable under our investment advisory and management agreement. See Note 3 to our consolidated financial statements for the year ended December 31, 2025 for more information on the base management fee, income based fee and capital gains incentive fee.
Cash payment of any income based fee and capital gains incentive fee otherwise earned by our investment adviser is deferred if during the most recent four full calendar quarter period ending on or prior to the date such payment is to be made the sum of (a) the aggregate distributions to our stockholders and (b) the change in net assets (defined as total assets less indebtedness and before taking into account any income based fee and capital gains incentive fee payable during the period) is less than 7.0% of our net assets (defined as total assets less indebtedness) at the beginning of such period. These calculations will be adjusted for any share issuances or repurchases. Any income based fee and capital gains incentive fee deferred for payment are carried over for payment in subsequent calculation periods to the extent such fees are payable under the terms of the investment advisory and management agreement. See Note 3 to our consolidated financial statements for the year ended December 31, 2025 for more information on the related deferral terms.
Administrative and other fees represent fees paid to Ares Operations and our investment adviser for our allocable portion of overhead and other expenses incurred by Ares Operations and our investment adviser in performing their obligations under the administration agreement and the investment advisory and management agreement, respectively, including our allocable portion of the compensation, rent and other expenses of certain of our officers and their respective staffs. See Note 3 to our consolidated financial statements for the year ended December 31, 2025, for more information on the administrative and other fees.
Other general and administrative expenses include, among other costs, professional fees, insurance, fees and expenses related to evaluating and making investments in portfolio companies and independent directors' fees.
Income Tax Expense, Including Excise Taxes
We have elected to be treated as a RIC under the Code and operate in a manner so as to qualify for the tax treatment applicable to RICs. To qualify as a RIC, we must, among other requirements, meet certain source-of-income and asset diversification requirements and timely distribute to our stockholders at least 90% of our investment company taxable income, as defined by the Code, for each year. We have made and intend to continue to make the requisite distributions to our stockholders which will generally relieve us from U.S. federal corporate-level income taxes.
Depending on the level of taxable income earned in a tax year, we may choose to carry forward such taxable income in excess of current year dividend distributions from such current year taxable income into the next tax year and pay a 4% excise tax on such income, as required. To the extent that we determine that our estimated current year taxable income will be in excess of estimated dividend distributions for the current year from such income, we accrue excise tax, if any, on estimated excess taxable income as such taxable income is earned. For the years ended December 31, 2025 and 2024, we recorded a net expense of $37 million and $35 million, respectively, for U.S. federal excise taxes.
Certain of our consolidated subsidiaries are subject to U.S. federal and state income taxes. For the years ended December 31, 2025 and 2024, we recorded a net tax expense of $121 million and $38 million, respectively, for such subsidiaries. The income tax expense for our taxable consolidated subsidiaries will vary depending on the level of realized gains from the exits of investments held by such taxable subsidiaries during the respective periods.
Net Realized Gains/Losses
The net realized gains (losses) from the sales, repayments or exits of investments during the years ended December 31, 2025 and 2024 were comprised of the following:
For the Years Ended December 31,
(in millions) 2025 2024
Sales, repayments or exits of investments(1) $ 11,565 $ 9,554
Net realized gains (losses) on investments:
Gross realized gains $ 614 $ 325
Gross realized losses (513) (385)
Total net realized gains (losses) on investments $ 101 $ (60)
_______________________________________________________________________________
(1)Includes $3,707 million and $759 million of loans sold to IHAM or certain IHAM Vehicles during the years ended December 31, 2025 and 2024, respectively. Net realized losses of approximately $0 million and $1 million were recorded on these transactions with IHAM during the years ended December 31, 2025 and 2024, respectively. See Note 4 to our consolidated financial statements for the year ended December 31, 2025 for more information on IHAM and the IHAM Vehicles.
The net realized gains on investments during the year ended December 31, 2025 consisted of the following:
(in millions)
Portfolio Company 		Net Realized Gains (Losses)
Potomac Intermediate Holdings II LLC $ 262
SageSure Holdings, LLC and SageSure LLC 68
Redwood Services, LLC and Redwood Services Holdco, LLC 59
Accommodations Plus Technologies LLC and Accommodations Plus Technologies Holdings LLC 39
Corient Holdings, Inc. 21
FS Squared Holding Corp. and FS Squared, LLC 19
Project Alpha Intermediate Holding, Inc. and Qlik Parent, Inc. 15
Align Precision Group, LLC and Align Precision Topco, L.P. (15)
North Haven Falcon Buyer, LLC and North Haven Falcon Holding Company, LLC (17)
Aimbridge Acquisition Co., Inc. (19)
H-Food Holdings, LLC and Matterhorn Parent, LLC (20)
SVP-Singer Holdings Inc. and SVP-Singer Holdings LP (22)
Florida Food Products, LLC (23)
Visual Edge Technology, Inc. (37)
Production Resource Group, L.L.C. and PRG III, LLC (43)
Implus Footcare, LLC, Implus Holdings, LLC, and Implus Topco, LLC (49)
Olympia Acquisition, Inc., Olympia TopCo, L.P., and Asclepius Holdings LLC (56)
Vobev, LLC and Vobev Holdings, LLC (63)
Senior Direct Lending Program, LLC (112)
Other, net 94
Total $ 101
During the year ended December 31, 2025, we also recognized net realized losses on foreign currency and other transactions of $6 million.
The net realized losses on investments during the year ended December 31, 2024 consisted of the following:
(in millions)
Portfolio Company 		Net Realized Gains (Losses)
Heelstone Renewable Energy, LLC $ 146
Benecon Midco II LLC 23
Precinmac (US) Holdings Inc., Trimaster Manufacturing Inc. and Blade Group Holdings, LP. 22
Pegasus Global Enterprise Holdings, LLC 20
RF HP SCF Investor, LLC 19
Murchison Oil and Gas, LLC and Murchison Holdings, LLC 16
Wellpath Holdings, Inc. (19)
SVP-Singer Holdings Inc. and SVP-Singer Holdings LP (19)
OTG Management, LLC (20)
SSE Buyer, Inc. (21)
Emergency Communications Network, LLC (22)
Pluralsight, Inc. (60)
H-Food Holdings, LLC (62)
SHO Holding I Corporation, Shoes For Crews (Europe) Limited and Never Slip TopCo, Inc. (119)
Other, net 36
Total $ (60)
During the year ended December 31, 2024, we also recognized net realized gains on foreign currency and other transactions of $5 million.
During the year ended December 31, 2024, we repaid in full the $403 million in aggregate principal amount of our unsecured convertible notes, which bore interest at a rate of 4.625% per year, upon their maturity in March 2024 with a combination of cash and shares of our common stock, resulting in a realized loss on extinguishment of debt of approximately $14 million.
Net Unrealized Gains/Losses
We value our portfolio investments at least quarterly and the changes in value are recorded as unrealized gains or losses in our consolidated statement of operations. Net unrealized gains and losses on investments, including the net change in deferred tax liabilities, for the years ended December 31, 2025 and 2024, were comprised of the following:
For the Years Ended December 31,
(in millions) 2025 2024
Unrealized appreciation $ 585 $ 793
Unrealized depreciation (648) (657)
Net unrealized (appreciation) depreciation reversed related to net realized gains or losses(1) 8 2
Total net unrealized gains (losses) on investments $ (55) $ 138
_______________________________________________________________________________
(1)The net unrealized (appreciation) depreciation reversed related to net realized gains or losses represents the unrealized appreciation or depreciation recorded on the related asset at the end of the prior periods.
The changes in net unrealized appreciation and depreciation on investments during the year ended December 31, 2025 consisted of the following:
(in millions)
Portfolio Company 		Net Unrealized Appreciation (Depreciation)
Global Medical Response, Inc. and GMR Buyer Corp. $ 37
Storm Investment S.a.r.l. 35
Imaging Business Machines, L.L.C. and Scanner Holdings Corporation 31
FEH Group, LLC. 25
Neptune Bidco US Inc. 22
Senior Direct Lending Program, LLC 20
CoreLogic, Inc. and T-VIII Celestial Co-Invest LP 20
SageSure Holdings, LLC 18
Teasdale Foods, Inc. and Familia Group Holdings Inc. (15)
Balrog Acquisition, Inc., Balrog Topco, Inc. and Balrog Parent, L.P. (16)
Pluralsight, Inc. (17)
EP Purchaser, LLC and TPG VIII EP Co-Invest II, L.P. (19)
Symplr Software Inc. and Symplr Software Intermediate Holdings, Inc. (24)
Sunrun Atlas Depositor 2019-2, LLC and Sunrun Atlas Holdings 2019-2, LLC (24)
Absolute Dental Group LLC and Absolute Dental Equity, LLC (27)
Eagle Football Holdings BidCo Limited and Eagle Football Holdings Limited (46)
VPROP Operating, LLC and V SandCo, LLC (48)
Other, net (35)
Total $ (63)
During the year ended December 31, 2025, we also recognized net unrealized losses on foreign currency and other transactions of $41 million.
The changes in net unrealized appreciation and depreciation on investments during the year ended December 31, 2024 consisted of the following:
(in millions)
Portfolio Company 		Net Unrealized Appreciation (Depreciation)
Potomac Intermediate Holdings II LLC $ 221
Global Medical Response, Inc. and GMR Buyer Corp. 39
Apex Clean Energy TopCo, LLC 31
SageSure Holdings, LLC 31
Cloud Software Group, Inc. 26
Centric Brands LLC 18
Corient Holdings, Inc. 17
High Street Buyer, Inc. and High Street Holdco LLC 17
Bragg Live Food Products, LLC 16
PS Operating Company LLC (15)
Dcert Buyer, Inc., DCert Preferred Holdings, Inc. and Destiny Digital Holdings, L.P. (15)
Storm Investment S.a.r.l. (17)
Aimbridge Acquisition Co., Inc. (17)
ADG, LLC (20)
Cornerstone OnDemand, Inc. (24)
North American Science Associates, LLC, Cardinal Purchaser LLC and Cardinal Topco Holdings, L.P. (25)
VPROP Operating, LLC and V SandCo, LLC (29)
Production Resource Group, L.L.C. (40)
Senior Direct Lending Program, LLC (43)
Vobev, LLC and Vobev Holdings, LLC (49)
Other, net 14
Total $ 136
During the year ended December 31, 2024, we also recognized net unrealized gains on foreign currency and other transactions of $50 million.
For the years ended December 31, 2024 and 2023
The comparison of the fiscal years ended December 31, 2024 and 2023 can be found in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 located within Part II, Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated herein by reference.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Our liquidity and capital resources are generated primarily from the net proceeds of public offerings of equity and debt securities, advances from our credit facilities (the Revolving Credit Facility, the Revolving Funding Facility, the SMBC Funding Facility and the BNP Funding Facility (each as defined below, and together, the "Credit Facilities")), net proceeds from the issuance of other securities, including unsecured notes and debt securitizations, as well as cash flows from operations.
In accordance with the Investment Company Act, we are allowed to borrow amounts such that our asset coverage, calculated pursuant to the Investment Company Act, is at least 150% after such borrowings (i.e., we are able to borrow up to two dollars for every dollar we have in assets less all liabilities and indebtedness not represented by senior securities issued by us). As of December 31, 2025, we had $638 million in cash and cash equivalents and $16.0 billion in total aggregate principal amount of outstanding debt ($16.0 billion at carrying value) and our asset coverage was 189%. Subject to borrowing base and other restrictions, we had approximately $5.5 billion available for additional borrowings under the Credit Facilities as of December 31, 2025.
We may from time to time seek to retire or repurchase our common stock through cash purchases, as well as retire, cancel or purchase our outstanding debt through cash purchases and/or exchanges, in open market purchases, privately negotiated transactions or otherwise. The amounts involved may be material. In addition, we may from time to time enter into additional credit facilities, increase the size of existing facilities or issue additional debt securities, including secured debt, unsecured debt and/or debt securities convertible into common stock. Any such purchases or exchanges of common stock or outstanding debt, or incurrence or issuance of additional debt would be subject to prevailing market conditions, our liquidity requirements, contractual and regulatory restrictions and other factors.
Equity Capital Activities
As of December 31, 2025 and 2024, our total equity market capitalization was $14.5 billion and $14.7 billion, respectively.
We may from time to time issue and sell shares of our common stock through public or "at the market" offerings. During the year ended December 31, 2025, we issued and sold the following shares of common stock:
(in millions, except per share amount)
Issuances of Common Stock 		Number of Shares Issued Gross Proceeds Underwriting Fees/Offering Expenses Net Proceeds Average Offering Price Per Share(1)
"At the market" offerings 42.4 $ 937.2 $ 9.7 $ 927.5 $ 22.11
Total 42.4 $ 937.2 $ 9.7 $ 927.5
________________________________________
(1) Represents the gross offering price per share before deducting underwriting discounts and commissions and offering expenses.
"At the Market" Offerings
We are a party to equity distribution agreements with several banks (the "Equity Distribution Agreements"). The Equity Distribution Agreements provide that we may from time to time issue and sell, by means of "at the market" offerings, up to $1.5 billion of our common stock. Subject to the terms and conditions of the Equity Distribution Agreements, sales of common stock, if any, may be made in transactions that are deemed to be "at the market" offerings as defined in Rule 415(a)(4) under the Securities Act. Under the currently effective Equity Distribution Agreements, common stock with an aggregate offering amount of $563 million remained available for issuance as of December 31, 2025.
Dividend Reinvestment Plan
See Note 12 to our consolidated financial statements for the year ended December 31, 2025 for information regarding shares of common stock issued or purchased in accordance with our dividend reinvestment plan.
Stock Repurchase Program
We are authorized under our stock repurchase program to purchase up to $1.0 billion in the aggregate of our outstanding common stock in the open market at certain thresholds below our net asset value per share, in accordance with the guidelines specified in Rule 10b-18 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The timing,
manner, price and amount of any share repurchases will be determined by us, in our sole discretion, based upon an evaluation of economic and market conditions, stock price, applicable legal and regulatory requirements and other factors. The stock repurchase program does not require us to repurchase any specific number of shares of common stock or any shares of common stock at all. Consequently, we cannot assure stockholders that any specific number of shares of common stock, if any, will be repurchased under the stock repurchase program. As of December 31, 2025, the expiration date of the stock repurchase program was February 15, 2026. The program may be suspended, extended, modified or discontinued at any time. As of December 31, 2025, there was $1.0 billion available for additional repurchases under the program.
During the years ended December 31, 2025 and 2024, we did not repurchase any shares of our common stock in the open market under the stock repurchase program.
See "Recent Developments," as well as Note 16 to our consolidated financial statements for the year ended December 31, 2025 for a subsequent event relating to our stock repurchase program.
Debt Capital Activities
Our debt obligations consisted of the following as of December 31, 2025 and 2024:
As of December 31,
2025 2024
(in millions) Total
Aggregate
Principal
Amount
Available/
Outstanding(1) 		Principal Amount Outstanding Carrying
Value 		Total
Aggregate
Principal
Amount
Available/
Outstanding(1) 		Principal Amount Outstanding Carrying
Value
Revolving Credit Facility $ 5,493 (2) $ 2,028 $ 2,031 $ 4,513 (2) $ 1,113 $ 1,113
Revolving Funding Facility 2,250 1,234 1,234 2,150 1,065 1,065
SMBC Funding Facility 1,100 (3) 563 563 800 (3) 502 502
BNP Funding Facility 1,265 717 717 1,265 889 889
April 2036 CLO Notes(4) 476 476 473 (5) 476 476 473 (5)
October 2036 CLO Secured Loans(4) 544 544 541 (5) 544 544 541 (5)
January 2038 CLO Notes (4) 700 700 697 (5) - - -
March 2025 Notes - - - (5) 600 600 600 (5)
July 2025 Notes - - - (5) 1,250 1,250 1,252 (5)
January 2026 Notes 1,150 1,150 1,150 (5) 1,150 1,150 1,148 (5)
July 2026 Notes 1,000 1,000 999 (5) 1,000 1,000 996 (5)
January 2027 Notes 900 900 900 (5)(6) 900 900 891 (5)(6)
June 2027 Notes 500 500 498 (5) 500 500 497 (5)
June 2028 Notes 1,250 1,250 1,248 (5) 1,250 1,250 1,248 (5)
March 2029 Notes 1,000 1,000 999 (5)(6) 1,000 1,000 985 (5)(6)
July 2029 Notes 850 850 861 (5)(6) 850 850 835 (5)(6)
September 2030 Notes 750 750 743 (5)(6) - - -
January 2031 Notes 650 650 634 (5)(6) - - -
November 2031 Notes 700 700 693 (5) 700 700 692 (5)
March 2032 Notes 1,000 1,000 1,010 (5)(6) - - -
Total $ 21,578 $ 16,012 $ 15,991 $ 18,948 $ 13,789 $ 13,727
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(1)Represents the total aggregate amount committed or outstanding, as applicable, under such instrument. Borrowings under the Credit Facilities are subject to borrowing base and other restrictions.
(2)Provides for an "accordion" feature that allows us, under certain circumstances, to increase the size of the Revolving Credit Facility to a maximum of $7.9 billion and $6.7 billion as of December 31, 2025 and 2024, respectively.
(3)Provides for an "accordion" feature that allows ACJB (as defined below), under certain circumstances, to increase the size of the SMBC Funding Facility to a maximum of $1.3 billion and $1.0 billion as of December 31, 2025 and 2024, respectively.
(4)Excludes the April 2036 CLO Subordinated Notes, the October 2036 CLO Subordinated Notes and the January 2038 CLO Subordinated Notes (each as defined below), which were retained by us and, as such, eliminated in consolidation.
(5)Represents the aggregate principal amount outstanding, less unamortized debt issuance costs and the net unaccreted/amortized discount or premium recorded upon issuance. In March 2025 and July 2025, we repaid in full the March 2025 Notes and the July 2025 Notes (each as defined below), respectively, upon their maturity. See "Recent Developments," as well as Note 16 to our consolidated financial statements for the year ended December 31, 2025 for subsequent events relating to the January 2026 Notes and an additional issuance of unsecured notes.
(6)The carrying value of the January 2027 Notes, the March 2029 Notes, the July 2029 Notes, the September 2030 Notes, the January 2031 Notes and the March 2032 Notes (each as defined below) includes adjustments as a result of effective hedge accounting relationships. See Note 6 to our consolidated financial statements for the year ended December 31, 2025 for more information on the interest rate swaps related to these unsecured notes issuances.
The weighted average stated interest rate and weighted average maturity, both on aggregate principal amount outstanding, of all our outstanding debt as of December 31, 2025 were 4.9% and 4.2 years, respectively, and as of December 31, 2024 were 4.9% and 3.8 years, respectively. The weighted average stated interest rate of all our outstanding debt as of December 31, 2025 and 2024 includes the impact of interest rate swaps. See Note 6 to our consolidated financial statements for the year ended December 31, 2025 for more information on the interest rate swaps.
The ratio of total principal amount of outstanding debt to stockholders' equity as of December 31, 2025 was 1.12:1.00 compared to 1.03:1.00 as of December 31, 2024.
Revolving Credit Facility
We are party to a senior secured revolving credit facility (as amended and restated, the "Revolving Credit Facility"), that allows us to borrow up to approximately $5.5 billion at any one time outstanding. The Revolving Credit Facility consists of an approximately $4.4 billion revolving tranche and an approximately $1.1 billion term loan tranche. As of December 31, 2025, the end of the revolving periods and the stated maturity dates of the various revolving and term loan tranches of the Revolving Credit Facility were as follows:
(in millions) Total Aggregate Principal Amount Committed End of Revolving Period Maturity Date
Revolving tranche $ 4,058 April 15, 2029 April 15, 2030
246 March 31, 2026 March 31, 2027
45 April 12, 2028 April 12, 2029
4,349
Term loan tranche 1,035 April 15, 2030
45 April 12, 2029
40 April 19, 2028
24 March 31, 2027
1,144
$ 5,493
The Revolving Credit Facility also provides for an "accordion" feature that allows us, under certain circumstances, to increase the overall size of the Revolving Credit Facility to a maximum of approximately $7.9 billion.
Subject to certain exceptions, the interest rate charged on the Revolving Credit Facility is based on SOFR plus a credit spread adjustment of 0.10% (or an alternate rate of interest for certain loans, commitments and/or other extensions of credit denominated in certain approved foreign currencies plus a spread adjustment, if applicable) plus an applicable spread of either 1.525%, 1.650%, 1.775% or an "alternate base rate" (as defined in the documents governing the Revolving Credit Facility) plus an applicable spread of either 0.525%, 0.650% or 0.775%, in each case, determined monthly based on the total amount of the borrowing base relative to the sum of (i) the greater of (a) the aggregate amount of revolving credit exposure and term loans outstanding under the Revolving Credit Facility and (b) 85% of the total commitments of the Revolving Credit Facility (or, if higher, the total revolving credit exposure) plus (ii) other debt, if any, secured by the same collateral as the Revolving Credit Facility. As of December 31, 2025, the applicable weighted average spread in effect was 1.53%. Subject to certain exceptions, we are required to pay a commitment fee of 0.325% per annum on any unused portion of the Revolving Credit Facility. We are also required to pay letter of credit fees of 1.775%, 1.900% or 2.025% per annum on letters of credit issued, determined monthly based on the total amount of the borrowing base relative to the total commitments of the Revolving Credit Facility and other debt, if any, secured by the same collateral as the Revolving Credit Facility. As of December 31, 2025, there was $2.0 billion outstanding under the Revolving Credit Facility and we were in compliance in all material respects with the terms of the Revolving Credit Facility.
Revolving Funding Facility
We and our consolidated subsidiary, Ares Capital CP Funding LLC ("Ares Capital CP"), are party to a revolving funding facility (as amended, the "Revolving Funding Facility"), that allows Ares Capital CP to borrow up to $2.3 billion at any one time outstanding. The Revolving Funding Facility is secured by all of the assets held by, and our membership interest in, Ares Capital CP. The end of the reinvestment period and the stated maturity date for the Revolving Funding Facility are July 28, 2028 and July 28, 2030, respectively. The interest rate charged on the Revolving Funding Facility is based on SOFR or a "base rate" (as defined in the documents governing the Revolving Funding Facility) plus an applicable spread of 1.80% per annum. Ares Capital CP is also required to pay a commitment fee of between 0.50% and 1.25% per annum depending on the size of the unused portion of the Revolving Funding Facility. As of December 31, 2025, there was $1.2 billion outstanding under the Revolving Funding Facility and we and Ares Capital CP were in compliance in all material respects with the terms of the Revolving Funding Facility.
SMBC Funding Facility
We and our consolidated subsidiary, Ares Capital JB Funding LLC ("ACJB"), are party to a revolving funding facility (as amended, the "SMBC Funding Facility"), with ACJB, as the borrower, and Sumitomo Mitsui Banking Corporation, as the administrative agent and collateral agent, that allows ACJB to borrow up to $1.1 billion at any one time outstanding. The SMBC Funding Facility also provides for an "accordion" feature that allows ACJB, under certain circumstances, to increase the overall size of the SMBC Funding Facility to $1.3 billion. The SMBC Funding Facility is secured by all of the assets held by ACJB. The end of the reinvestment period and the stated maturity date for the SMBC Funding Facility are July 25, 2028 and July 25, 2030, respectively. The reinvestment period and the stated maturity date are both subject to two one-year extensions by mutual agreement. The interest rate charged on the SMBC Funding Facility is based on an applicable spread of either (i) 1.80% over SOFR or (ii) 0.80% over a "base rate" (as defined in the documents governing the SMBC Funding Facility). ACJB is also required to pay a commitment fee of between 0.50% and 1.00% per annum depending on the size of the unused portion of the SMBC Funding Facility. As of December 31, 2025, there was $563 million outstanding under the SMBC Funding Facility and we and ACJB were in compliance in all material respects with the terms of the SMBC Funding Facility.
BNP Funding Facility
We and our consolidated subsidiary, ARCC FB Funding LLC ("AFB"), are party to a revolving funding facility (as amended, the "BNP Funding Facility") with AFB, as the borrower, and BNP Paribas, as the administrative agent and lender, that allows AFB to borrow up to approximately $1.3 billion at any one time outstanding. The BNP Funding Facility is secured by all of the assets held by AFB. The end of the reinvestment period and the stated maturity date for the BNP Funding Facility are March 20, 2028 and March 20, 2030, respectively. The interest rate charged on the BNP Funding Facility is based on applicable SOFR, or a "base rate" (as defined in the documents governing the BNP Funding Facility) plus a margin of (i) 1.90% during the reinvestment period and (ii) 2.40% following the reinvestment period. As of December 31, 2025, the applicable spread in effect was 1.90%. AFB is required to pay a commitment fee of between 0.00% and 1.25% per annum depending on the size of the unused portion of the BNP Funding Facility. As of December 31, 2025, there was $717 million outstanding under the BNP Funding Facility and we and AFB were in compliance in all material respects with the terms of the BNP Funding Facility.
Debt Securitizations
ADL CLO 1 Debt Securitization
In May 2024, our wholly owned consolidated subsidiary, Ares Direct Lending CLO 1 LLC ("ADL CLO 1"), completed a $702 million term debt securitization (the "ADL CLO 1 Debt Securitization"). The ADL CLO 1 Debt Securitization is also known as a collateralized loan obligation and is an on-balance sheet financing incurred by ADL CLO 1, which is consolidated by us for financial reporting purposes and subject to our overall asset coverage requirement. The notes offered in the ADL CLO 1 Debt Securitization that mature on April 25, 2036 (collectively, the "April 2036 CLO Notes") were issued by ADL CLO 1 pursuant to the indenture governing the April 2036 CLO Notes and include (i) $406 million of Class A Senior Notes (the "April 2036 Class A CLO Notes"); (ii) $70 million of Class B Senior Notes (the "April 2036 Class B CLO Notes" and, together with the April 2036 Class A CLO Notes, the "April 2036 CLO Secured Notes"); and (iii) approximately $226 million of subordinated notes (the "April 2036 CLO Subordinated Notes"). We retained all of the April 2036 CLO Subordinated Notes, as such, the April 2036 CLO Subordinated Notes are eliminated in consolidation. The following table presents information on the April 2036 CLO Notes as of December 31, 2025 (dollar amounts in millions):
Class Type Principal Outstanding Maturity Date Interest Rate
April 2036 Class A CLO Notes Senior Secured Floating Rate $ 406 April 25, 2036
SOFR+1.80%
April 2036 Class B CLO Notes Senior Secured Floating Rate 70 April 25, 2036
SOFR+2.20%
Total April 2036 CLO Secured Notes 476
April 2036 CLO Subordinated Notes Subordinated 226 April 25, 2036 None
Total April 2036 CLO Notes $ 702
The April 2036 CLO Secured Notes are the secured obligations of ADL CLO 1 and are backed by a diversified portfolio of first lien senior secured loans contributed by us to ADL CLO 1 pursuant to the terms of a contribution agreement. The interest rate charged on the April 2036 CLO Secured Notes is based on SOFR plus a blended weighted average spread of 1.86%.
Our investment adviser serves as asset manager to ADL CLO 1 under an asset managementagreement and is entitled to receive certain management fees for providing these services under the agreement. Our investment adviser has agreed to waive any management fees from ADL CLO 1.
ADL CLO 4 Debt Securitization
In November 2024, our wholly owned consolidated subsidiary, Ares Direct Lending CLO 4 LLC ("ADL CLO 4"), completed a $804 million term debt securitization (the "ADL CLO 4 Debt Securitization"). The ADL CLO 4 Debt Securitization is also known as a collateralized loan obligation and is an on-balance sheet financing incurred by ADL CLO 4, which is consolidated by us for financial reporting purposes and subject to our overall asset coverage requirement. The loans incurred by ADL CLO 4 in the ADL CLO 4 Debt Securitization that mature on October 24, 2036 (collectively, the "October 2036 CLO Secured Loans") include (i) $464 million of Class A Senior Loans (the "October 2036 Class A CLO Loans"), and (ii) $80 million of Class B Senior Loans (the "October 2036 Class B CLO Loans"). The October 2036 CLO Secured Loans may be converted by the lender into notes issued by ADL CLO 4 and bearing the same economic terms, subject to certain conditions under the documents governing the October 2036 CLO Secured Loans and the indenture governing such loans. In addition, in connection with the ADL CLO 4 Debt Securitization, ADL CLO 4 issued approximately $260 million of subordinated notes (the "October 2036 CLO Subordinated Notes"). We retained all of the October 2036 CLO Subordinated Notes, as such, the October 2036 CLO Subordinated Notes are eliminated in consolidation. The following table presents information on the October 2036 CLO Notes as of December 31, 2025 (dollar amounts in millions):
Class Type Principal Outstanding Maturity Date Interest Rate
October 2036 Class A CLO Loans
Senior Secured Floating Rate $ 464 October 24, 2036 SOFR+1.54%
October 2036 Class B CLO Loans
Senior Secured Floating Rate 80 October 24, 2036 SOFR+1.83%
Total October 2036 CLO Secured Loans 544
October 2036 CLO Subordinated Notes Subordinated 260 October 24, 2036 None
Total October 2036 CLO Notes $ 804
The October 2036 CLO Secured Loans are the secured obligations of ADL CLO 4 and are backed by a diversified portfolio of first lien senior secured loans contributed by us to ADL CLO 4 pursuant to the terms of a contribution agreement. The interest rate charged on the October 2036 CLO Secured Loans is based on SOFR plus a blended weighted average spread of 1.58%.
Our investment adviser serves as asset manager to ADL CLO 4 under an asset managementagreement and is entitled to receive certain management fees for providing these services under the agreement. Our investment adviser has agreed to waive any management fees from ADL CLO 4.
ADL CLO 7 Debt Securitization
In December 2025, our wholly owned consolidated subsidiary, Ares Direct Lending CLO 7 LLC ("ADL CLO 7"), completed a $1.0 billion term debt securitization (the "ADL CLO 7 Debt Securitization"). The ADL CLO 7 Debt Securitization is also known as a collateralized loan obligation and is an on-balance sheet financing incurred by ADL CLO 7, which is consolidated by us for financial reporting purposes and subject to our overall asset coverage requirement. The notes offered in the ADL CLO 7 Debt Securitization that mature on January 2038 (collectively, the "January 2038 CLO Notes") were issued by ADL CLO 7 pursuant to the indenture governing the January 2038 CLO Notes and include (i) $570 million of Class A-1 Senior Notes (the "January 2038 Class A-1 CLO Notes"); (ii) $50 million of Class A-2 Senior Notes (the "January 2038 Class A-2 CLO Notes"); (iii) $80 million of Class B Senior Notes (the "January 2038 Class B CLO Notes" and, together with the January 2038 Class A-1 CLO Notes and January 2038 Class A-2 CLO Notes, the "January 2038 CLO Secured Notes"); and (iv) approximately $303 million of subordinated notes (the "January 2038 CLO Subordinated Notes"). We retained all of the January 2038 CLO Subordinated Notes, as such, the January 2038 CLO Subordinated Notes are eliminated in consolidation. The following table presents information on the January 2038 CLO Notes as of December 31, 2025 (dollar amounts in millions):
Class Type Principal Outstanding Maturity Date Interest Rate
January 2038 Class A-1 CLO Notes Senior Secured Floating Rate $ 570 January 20, 2038 SOFR+1.40%
January 2038 Class A-2 CLO Notes Senior Secured Floating Rate 50 January 20, 2038 SOFR+1.65%
January 2038 Class B CLO Notes Senior Secured Floating Rate 80 January 20, 2038 SOFR+1.85%
Total January 2038 CLO Secured Notes 700
January 2038 CLO Subordinated Notes Subordinated 303 January 20, 2038 None
Total January 2038 CLO Notes $ 1,003
The January 2038 CLO Secured Notes are the secured obligations of ADL CLO 7 and are backed by a diversified portfolio of first lien senior secured loans contributed by us to ADL CLO 7 pursuant to the terms of a contribution agreement. The interest rate charged on the January 2038 CLO Secured Notes is based on SOFR plus a blended weighted average spread of 1.47%.
Our investment adviser serves as asset manager to ADL CLO 7 under an asset managementagreement and is entitled to receive certain management fees for providing these services under the agreement. Our investment adviser has agreed to waive any management fees from ADL CLO 7.
Unsecured Notes
We issued certain unsecured notes (we refer to each series of unsecured notes using the defined term set forth under the "Unsecured Notes" column of the table below and collectively refer to all such series as the "Unsecured Notes"), that pay interest semi-annually and all principal amounts are due upon maturity. Each of the Unsecured Notes may be redeemed in whole or in part at any time at our option at a redemption price equal to par plus a "make whole" premium, if applicable, as determined pursuant to the indentures governing each of the Unsecured Notes, plus any accrued and unpaid interest. Certain key terms related to the features for the Unsecured Notes as of December 31, 2025 are listed below.
(dollar amounts in millions)
Unsecured Notes 		Aggregate Principal Amount Issued Effective Stated Interest Rate Original Issuance Date Maturity Date
January 2026 Notes $ 1,150 3.875% July 15, 2020 January 15, 2026
July 2026 Notes $ 1,000 2.150% January 13, 2021 July 15, 2026
January 2027 Notes(1) $ 900 6.331% August 3, 2023 January 15, 2027
June 2027 Notes $ 500 2.875% January 13, 2022 June 15, 2027
June 2028 Notes $ 1,250 2.875% June 10, 2021 June 15, 2028
March 2029 Notes(1) $ 1,000 5.895% January 23, 2024 March 1, 2029
July 2029 Notes(1) $ 850 5.393% May 13, 2024 July 15, 2029
September 2030 Notes(1) $ 750 5.643% June 3, 2025 September 1, 2030
January 2031 Notes $ 650 5.100% September 9, 2025 January 15, 2031
November 2031 Notes $ 700 3.200% November 4, 2021 November 15, 2031
March 2032 Notes $ 1,000 5.800% January 8, 2025 March 8, 2032
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(1)The effective stated interest rates of the January 2027 Notes, the March 2029 Notes, the July 2029 Notes and the September 2030 Notes include the impact of interest rate swaps.
In March 2025, we repaid in full the $600 million in aggregate principal amount outstanding of unsecured notes (the "March 2025 Notes") upon their maturity. The March 2025 Notes bore interest at a rate of 4.250% per annum. In July 2025, we repaid in full the $1,250 million in aggregate principal amount outstanding of unsecured notes (the "July 2025 Notes") upon their maturity. The July 2025 Notes bore interest at a rate of 3.250% per annum.
See "Recent Developments," as well as Note 16 to our consolidated financial statements for the year ended December 31, 2025 for subsequent events relating to the January 2026 Notes and an additional issuance of unsecured notes.
In connection with certain of the unsecured notes issued by us, we have entered into interest rate swaps to more closely align the interest rates of such liabilities with our investment portfolio, which consists primarily of floating rate loans. We designated these interest rate swaps and the associated unsecured notes as qualifying fair value hedge accounting relationships. Under the interest rate swaps, we receive a fixed interest rate and pay a floating interest rate of one-month SOFR plus an applicable spread, as disclosed below. Certain information related to our interest rate swaps as of December 31, 2025 is presented below.
(dollar amounts in millions) Description Hedged Item Company Receives Company Pays Maturity Date Notional Amount
Interest rate swap January 2027 Notes 7.000 %
SOFR +2.5810%
January 15, 2027 $ 900
Interest rate swap March 2029 Notes 5.875 %
SOFR +2.0230%
March 1, 2029 $ 1,000
Interest rate swap July 2029 Notes 5.950 %
SOFR +1.6430%
July 15, 2029 $ 850
Interest rate swap September 2030 Notes 5.500 %
SOFR +1.7705%
September 1, 2030 $ 750
Interest rate swap(1) January 2031 Notes 5.100 %
SOFR +1.7270%
January 15, 2031 $ 650
Interest rate swap(1) March 2032 Notes 5.800 %
SOFR +1.6995%
March 8, 2032 $ 1,000
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(1)In connection with the issuances of the January 2031 Notes and the March 2032 Notes, we entered into forward-starting interest rate swaps with an effective date of July 15, 2026 and January 8, 2026, respectively.
See Note 6 to our consolidated financial statements for the year ended December 31, 2025 for more information on our interest rate swaps.
See "Recent Developments," as well as Note 16 to our consolidated financial statements for the year ended December 31, 2025 for subsequent events relating to an additional interest rate swap in connection with an additional issuance of unsecured notes.
As of December 31, 2025, we were in compliance in all material respects with the indentures governing the Unsecured Notes.
The Unsecured Notes are our senior unsecured obligations and rank senior in right of payment to any future indebtedness that is expressly subordinated in right of payment to the Unsecured Notes; equal in right of payment to our existing and future unsecured indebtedness that is not expressly subordinated; effectively junior in right of payment to any of our secured indebtedness (including existing unsecured indebtedness that we later secure) to the extent of the value of the assets securing such indebtedness; and structurally junior to all existing and future indebtedness (including trade payables) incurred by our subsidiaries, financing vehicles or similar facilities.
RECENT DEVELOPMENTS
In January 2026, we issued $750 million in aggregate principal amount of unsecured notes, which bear interest at a rate of 5.250% per annum and mature on April 12, 2031 (the "April 2031 Notes"). The April 2031 Notes pay interest semi-annually and all principal is due upon maturity. The April 2031 Notes may be redeemed in whole or in part at any time at our option at a redemption price equal to par plus a "make whole" premium, if applicable, as determined pursuant to the indenture governing the April 2031 Notes, and any accrued and unpaid interest. The April 2031 Notes were issued at a discount to the principal amount. In connection with the April 2031 Notes, we entered into an interest rate swap for a total notional amount of $750 million that matures on April 12, 2031. Under the interest rate swap, we will receive a fixed interest rate of 5.250% and pay a floating interest rate of one-month SOFR plus 1.7217%.
In January 2026, we repaid in full the January 2026 Notes upon their maturity, which bore interest at a rate of 3.875% per annum.
In February 2026, our board of directors authorized an amendment to our existing stock repurchase program to extend the expiration date of the program from February 15, 2026 to February 15, 2027. Under the program, we may repurchase up to $1.0 billion in the aggregate of our outstanding common stock in the open market at a price per share that meets certain thresholds below our net asset value per share, in accordance with the guidelines specified in Rule 10b-18 of the Exchange Act. The timing, manner, price and amount of any share repurchases will be determined by us, in our discretion, based upon the evaluation of economic and market conditions, stock price, applicable legal and regulatory requirements and other factors.
From January 1, 2026 through January 29, 2026, we made new investment commitments of approximately $1.4 billion, of which approximately $966 million were funded. Of the approximately $1.4 billion in new investment commitments, 90% were in first lien senior secured loans, 5% were in Ares Capital's subordinated loan to IHAM, 3% were in preferred equity and 2% were in other equity. Of the approximately $1.4 billion in new investment commitments, 94% were floating rate, 2% were fixed rate and 4% were non-income producing. The weighted average yield of debt and other income producing securities funded during the period at amortized cost was 9.0% and the weighted average yield on total investments funded during the period at amortized cost was 8.5%. We may seek to sell all or a portion of these new investment commitments, although there can be no assurance that we will be able to do so.
From January 1, 2026 through January 29, 2026, we exited approximately $709 million of investment commitments. Of the approximately $709 million of exited investment commitments, 89% were first lien senior secured loans, 9% were second lien senior secured loans, 1% were subordinated certificates of the SDLP and 1% were other equity. Of the approximately $709 million of exited investment commitments, 97% were floating rate, 2% were fixed rate and 1% were non-income producing. The weighted average yield of debt and other income producing securities exited or repaid during the period at amortized cost was 10.1% and the weighted average yield on total investments exited or repaid during the period at amortized cost was 10.0%. Of the approximately $709 million of investment commitments exited from January 1, 2026 through January 29, 2026, we recognized total net realized gains of approximately $16 million.
In addition, as of January 29, 2026, we had an investment backlog of approximately $2.2 billion. Investment backlog includes transactions approved by our investment adviser's U.S. direct lending investment committee and/or for which a formal mandate, letter of intent or a signed commitment have been issued, and therefore we believe are likely to close. The consummation of any of the investments in this backlog depends upon, among other things, one or more of the following: our acceptance of the terms and structure of such investment and the execution and delivery of satisfactory transaction documentation. In addition, we may sell all or a portion of these investments and certain of these investments may result in the repayment of existing investments. We cannot assure you that we will make any of these investments or that we will sell all or any portion of these investments.
CRITICAL ACCOUNTING ESTIMATES
The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. Changes in the economic environment, financial markets, and any other parameters used in determining such estimates could cause actual results to differ. Our critical accounting estimates, including those relating to the valuation of our investment portfolio, are described below. The critical accounting estimates should be read in conjunction with our risk factors as disclosed in "Item 1A. Risk Factors." See Note 2 to our consolidated financial statements for the year ended December 31, 2025 for more information on our critical accounting policies.
Investments
Investment transactions are recorded on the trade date. Realized gains or losses are measured by the difference between the net proceeds from the repayment or sale and the amortized cost basis of the investment using the specific identification method without regard to unrealized gains or losses previously recognized, and include investments charged off during the period, net of recoveries. Unrealized gains or losses primarily reflect the change in investment values, including the reversal of previously recorded unrealized gains or losses when gains or losses are realized.
Pursuant to Rule 2a-5 under the Investment Company Act, our board of directors designated our investment adviser as our valuation designee (the "Valuation Designee") to perform the fair value determinations for investments held by us without readily available market quotations, subject to the oversight of our board of directors. All investments are recorded at their fair value.
Investments for which market quotations are readily available are typically valued at such market quotations. In order to validate market quotations, the Valuation Designee looks at a number of factors to determine if the quotations are representative of fair value, including the source and nature of the quotations. Debt and equity securities that are not publicly traded or whose market prices are not readily available (i.e., substantially all of our investments) are valued at least quarterly at fair value as determined in good faith by the Valuation Designee, subject to the oversight of our board of directors, based on, among other things, the input of our independent third-party valuation providers ("IVPs") that have been engaged to support the valuation of such portfolio investments quarterly, beginning as of the third quarter after origination (with certain de minimis exceptions) and under a valuation policy and a consistently applied valuation process. The valuation process is conducted at the end of each fiscal quarter by the Valuation Designee, and beginning with the first quarter of 2025, substantially all investments in our investment portfolio at fair value are subject to review by an IVP each quarter, as discussed further below. However, we may use these IVPs to review the value of our investments more frequently, including in connection with the occurrence of significant events or changes in value affecting a particular investment. In addition, our independent registered public accounting firm obtains an understanding of, and performs select procedures relating to, our valuation process within the context of performing our integrated audit.
As part of the valuation process, the Valuation Designee may take into account the following types of factors, if relevant, in determining the fair value of our investments: the enterprise value of a portfolio company (the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time), the nature and realizable value of any collateral, the portfolio company's ability to make payments and its earnings and discounted cash flow, the markets in which the portfolio company does business, a comparison of the portfolio company's securities to any similar publicly traded securities, changes in the interest rate environment and the credit markets, which may affect the price at which similar investments would trade in their principal markets and other relevant factors. When an external event such as a purchase transaction, public offering or subsequent sale occurs, the Valuation Designee considers the pricing indicated by the external event to corroborate the valuation.
Because there is not a readily available market value for most of the investments in our portfolio, substantially all of our portfolio investments are valued at fair value as determined in good faith by the Valuation Designee, as described herein. Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of our investments may fluctuate from period to period. Additionally, the fair value of our investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values that we may ultimately realize. Further, such investments are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate a portfolio investment in a forced or liquidation sale, we could realize significantly less than the value at which we have recorded it.
In addition, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different than the unrealized gains or losses reflected in the valuations currently assigned.
The Valuation Designee, subject to the oversight of our board of directors, undertakes a multi-step valuation process each quarter, as described below:
•Our quarterly valuation process begins with a preliminary valuation being prepared by the investment professionals responsible for the portfolio investment in conjunction with our portfolio management and valuation team.
•Preliminary valuations are reviewed and discussed by the valuation committee of the Valuation Designee.
•When a portfolio investment is reviewed by an IVP:
◦Relevant information related to the portfolio investment is made available by the Valuation Designee to the IVP, who does not independently verify such information.
◦The IVP reviews and analyzes the information provided by the Valuation Designee, along with relevant market and economic data, and independently determines a range of values for the portfolio investment.
◦The IVP provides its analysis to the Valuation Designee to support the IVP's valuation methodology and calculations.
•The valuation committee of the Valuation Designee determines the fair value of each investment in our portfolio without a readily available market quotation in good faith based on, among other things, the input of the IVPs, where applicable.
•When a portfolio investment is reviewed by an IVP, a positive assurance opinion or independent valuation report is issued by the IVP that confirms the fair value determined by the Valuation Designee for the portfolio investment is within the range of values independently calculated by such IVP.
Fair Value of Financial Instruments
We follow ASC 825-10, Recognition and Measurement of Financial Assets and Financial Liabilities ("ASC 825-10"), which provides companies the option to report selected financial assets and liabilities at fair value. ASC 825-10 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities and a better understanding of the effect of the company's choice to use fair value on its earnings. ASC 825-10 also requires entities to display the fair value of the selected assets and liabilities on the face of the balance sheet. We have not elected the ASC 825-10 option to report selected financial assets and liabilities at fair value. With the exception of the line items entitled "other assets" and "debt," which are reported at amortized cost, the carrying value of all other assets and liabilities approximate fair value.
We also follow ASC 820-10, which expands the application of fair value accounting. ASC 820-10 defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements. ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 requires us to assume that the portfolio investment is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. In accordance with ASC 820-10, we have considered its principal market as the market in which we exit our portfolio investments with the greatest volume and level of activity. ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below:
•Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.
•Level 2 - Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
•Level 3 - Valuations based on inputs that are unobservable and significant to the overall fair value measurement.
In addition to using the above inputs in investment valuations, the Valuation Designee continues to employ its net asset valuation policy and procedures that have been reviewed by our board of directors in connection with their designation of our investment adviser as the valuation designee and are consistent with the provisions of Rule 2a-5 under the Investment Company Act and ASC 820-10. Consistent with its valuation policy and procedures, the Valuation Designee evaluates the source of inputs, including any markets in which our investments are trading (or any markets in which securities with similar attributes are trading), in determining fair value. Because there is not a readily available market value for most of the investments in our portfolio, the fair value of the investments must typically be determined using unobservable inputs.
Our portfolio investments (other than as described below in the following paragraph) are typically valued using two different valuation techniques. The first valuation technique is an analysis of the enterprise value ("EV") of the portfolio company. EV means the entire value of the portfolio company to a market participant, including the sum of the values of debt and equity securities used to capitalize the enterprise at a point in time. The primary method for determining EV uses a multiple analysis whereby appropriate multiples are applied to the portfolio company's EBITDA (generally defined as net income before net interest expense, income tax expense, depreciation and amortization). EBITDA multiples are typically determined based upon review of market comparable transactions and publicly traded comparable companies, if any. The Valuation Designee may also employ other valuation multiples to determine EV, such as revenues or, in the case of certain portfolio companies in the power generation industry, kilowatt capacity. The second method for determining EV uses a discounted cash flow analysis whereby future expected cash flows of the portfolio company are discounted to determine a present value using estimated discount rates (typically a weighted average cost of capital based on costs of debt and equity consistent with current market conditions). The EV analysis is performed to determine the value of equity investments, the value of debt investments in portfolio companies where we have control or could gain control through an option or warrant security, and to determine if there is credit impairment for debt investments. If debt investments are credit impaired, an EV analysis may be used to value such debt investments; however, in addition to the methods outlined above, other methods such as a liquidation or wind-down analysis may be utilized to estimate EV. The second valuation technique is a yield analysis, which is typically performed for non-credit impaired debt investments in portfolio companies where we do not own a controlling equity position. To determine fair value using a yield analysis, a current price is imputed for the investment based upon an assessment of the expected market yield for a similarly structured investment with a similar level of risk. In the yield analysis, the Valuation Designee considers the current contractual interest rate, the maturity and other terms of the investment relative to the risk of the company and the specific investment. A key determinant of risk, among other things, is the leverage through the investment relative to the EV of the portfolio company. As debt investments held by us are substantially illiquid with no active transaction market, the Valuation Designee depends on primary market data, including newly funded transactions, as well as secondary market data with respect to high yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable.
For other portfolio investments such as investments in the SDLP Certificates and IHAM, discounted cash flow analysis is the primary technique utilized to determine fair value. Expected future cash flows associated with the investment are discounted to determine a present value using a discount rate that reflects estimated market return requirements.
See Note 8 to our consolidated financial statements for the year ended December 31, 2025 for more information on our valuation process.
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