Fitch affirms Ares Capital

Fitch Ratings said it affirmed the long-term issuer default rating, secured debt rating and unsecured debt rating of Ares Capital Corp. at BBB.

The outlook is stable.

The agency said the action follows the company’s receipt of board approval to reduce its asset coverage requirement.

Fitch said that Ares received approval to reduce its asset coverage requirement to 150% from 200%, which effectively allows the firm to increase its leverage ratio to a maximum of 2x from 1x, effective on June 21, 2019.

The agency said the affirmation reflects a view that the proposed increase in leverage is sufficiently mitigated by an expected incremental improvement in the risk profile of the portfolio, Ares' peer-superior track record in credit and an expectation that the covenant cushion will be maintained at a sufficient level to account for potential valuation volatility in the portfolio.

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