Ares Capital is close to acquiring a $150 million portfolio of senior secured loans, mezzanine debt and equity investments in CDOs from Royal Bank of Canada’s RBC Capital Partners division. Ares paid $250,000 last month for the right to acquire the portfolio but needs to raise the money through selling shares in a newly formed business development corporation (BDC). A $450 million IPO is anticipated this week, with the portfolio forming the bedrock for the new vehicle. An Ares spokesman declined comment and an RBC spokesman could not provide comment by press time.
A group of RBC executives who previously originated and managed the portfolio joined Ares this summer, including Michael Arougheti, who will be President of the BDC. Arougheti was a managing partner of the principal finance group of RBC. Kipp deVeer and Michael Smith also joined Ares from RBC. According to a Securities and Exchange Commission filing, the three control an entity that has a right of first refusal on the portfolio.
Included in the portfolio are loans and investments in middle-market companies such as Berkline/BenchCraft, Billing Concepts, Diversified Collection Services, Esselte, HB&G Building Products, Mactec, Mechanical Dynamics & Analysis, Reef Holdings Corp., Shoes For Crews, SouthernCare, United Site Services, Universal Trailer Group and York Label Holdings. There are also preferred shares in two RBC CDOs—Foxe Basin CLO 2003 and Hudson Straits CLO 2004.