Good afternoon. Welcome to Ares Capital Corporation’s Third Quarter Ended September 30, 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. As a remainder, this conference is being recorded on Wednesday, November 2, 2016. Comments made during the course of this conference call and webcast, and the accompanying documents, contain forward-looking statements and are subject to risks and uncertainties. Many of these forward-looking statements can be identified by the use of the words such as anticipates, believes, expects, intends, will, should, may, and similar expressions. The company’s actual results could differ materially from those expressed in such forward-looking statements for any reason, including those listed in its SEC filings. Ares Capital Corporation assumes no obligation to update any such forward-looking statements. Please also note that past performance or market information is not a guarantee of future results. During this conference call, the company may discuss core earnings per share or core EPS, which is a non-GAAP financial measure as defined by the SEC Regulation G. Core EPS is the net per share increase or decrease in stockholders’ equity resulting from operations less professional fees and other costs related to the proposed acquisition of American Capital, realized and unrealized gains and losses, any capital gains, incentive fees attributable to such realized and unrealized gains and losses, and any income taxes related to such realized gains and losses. A reconciliation of core EPS to the net per share increase or decrease in stockholders’ equity resulting from operations to the most directly comparable GAAP financial measure, can be found in the accompanying slide presentation for this call by going to the company’s website. The company believes that core EPS provides useful information to investors regarding financial performance, because it is one method the company uses to measure its financial condition and results of operations. Certain information discussed in this presentation, including information relating to portfolio companies, was derived from third-party sources and has not been independently verified, and accordingly, the company makes no representation or warranty in respect of this information. As a reminder, the company’s third quarter ended September 30, 2016 earnings presentation is available on the company’s website at www.arescapitalcorp.com, by clicking on the Q3-16 Earnings Presentation link on the home page of the Investor Resources section. Ares Capital Corporation’s earnings release and 10-Q are available on the company’s website. I will now turn the call over to Mr. Kipp deVeer, Ares Capital Corporation’s Chief Executive Officer.

Thank you, Amy. Good afternoon and thanks to everyone for joining us today. Before I discuss our third quarter results, let me provide an update on our pending acquisition of American Capital. We’ve been working very closely with the team at ACAS and collectively we made considerable progress on our strategic and financial objectives. We remain enthusiastic about the immediate and long-term benefits of the merger, which will bring together the two largest business development companies in the industry and what we believe will be a highly creative transaction and should be beneficial to both shareholder bases. In terms of timing, we recently announced that we will hold a special meeting for our stockholders on December 15. And subject to shareholder approval and other customary closing conditions, we’re targeting as early as the first week in January for a closing. We expect the transaction will be immediately accretive to our core earnings per share and anticipate substantial long-term earnings benefits that we hope can serve as a catalyst for dividend growth at ARCC. Pro-forma for the transaction we estimate the company will have approximately $12 billion of assets. We believe this increased scale will enhance our leadership position in the middle market direct lending arena and that our ability to originate and hold even larger transactions will enable us to offer attractive returns to shareholders over the long term. I’d like to change course for a moment and briefly summarize our third quarter results. We delivered strong basic and diluted core earnings per share of $0.43 and GAAP earnings per share of $0.35. And this morning we declared a fourth quarter dividend of $0.38 per share, which is in line with these results and consistent with the quarterly dividend we paid shareholders for the last four years beginning with the…

Thank you, Kipp. Our basic and diluted core earnings per share were $0.43 for the third quarter of 2016, as compared to $0.39 for the second quarter of 2016, and $0.41 for the third quarter of 2015. Our higher core earnings in the third quarter were primarily driven by higher structuring fee income as a result of the significant origination activity we had during the quarter. Our basic and diluted GAAP net income per share for the third quarter of 2016 was $0.35 compared to $0.50 for the second quarter of 2016, and $0.37 for the third quarter of 2015. Our lower GAAP earnings in the third quarter were primarily driven by unrealized losses in two names. As of September 30, 2016 our portfolio totaled $8.8 billion of fair value and we had total assets of $9.1 billion. At September 30, 2016 the weighted average yield on our debt and other income producing securities at amortized cost was 9.7% and the weighted average yield on total investments at amortized cost was 8.7%, as compared to 9.8% and 8.9% respectively at June 30, 2016. Since the prior quarter end, our portfolio yields declined modestly primarily from the continued decline in the yield on our SSLP subordinated certificates. However this decline was partially offset by the benefit to our portfolio yields as a result of the initial funding of the SDLP. Where we sold assets that had a weighted average yield of 7% and exchange for SDLP subordinated certificates with the yield of 13.5%. The structure and economics of the SDLP are similar to how the SSLP operated prior to the start of the wind down. As we continue to ramp the SDLP portfolio both in terms of size and diversity the yield on our SDLP subcerts has the potential to grow.…

Thanks Penni. I’d like to spend a few minutes providing an update on the portfolio. We continue to see reasonable growth at our underlying portfolio companies with LTM EBITDA at our corporate board was increasing approximately 7% year-over-year. This is certainly better than what the broader market offers today. Although, our rate of growth is down from the low double digit EBITDA growth that we saw a year ago. Non-accruals generally remained low for ARCC and by industry standards. However they did show a modest sequential tick-up this quarter to 2.3% of investment at cost and 1.2% at fair value. We take comfort in the fact that they’re still lower than the 2.6% of investments at cost and 1.7% at fair value at year end 2015. Overall, we moved one company to non-accrual status this quarter, and removed one company from non-accrual status. Our approach to portfolio and risk management remains consistent. We’re fortunate and then we can originate in select what we deem to be the very best credits, and do not manage to a benchmark like many others in global credit. We’ve largely avoided the industries that we see as more vulnerable and those that are starting to exhibit weakness. For example, we’ve been meaningfully underweight the oil and gas sector. Today, we have only two investments so we consider to have direct exposure to this sector. One has been restructured due to the lower commodity price environment, and we currently own that company with the other lenders. And the other one is performing quite well. We don’t have any direct exposure to metals and mining, auto or home building and have limited investments in other areas that seem to be weakening like retail, restaurants and general industrials. This proactive approach to industry selection is a key differentiator…

Thank you. [Operator Instructions] our first question is from John Hecht at Jefferies.

Good morning guys. Thanks very much. One question on the quarter, just details on the 10Q. New term on loans of 94 months, I assume that was impacted by the subordinate piece of the SDLP. What was the term ex that of new loans.

I would say you got the cause right, but I’m not sure we can answer it once it’s removed, but when we take it offline John, we will go get the answer to that and…

Okay. That’s helpful. And then, I’m just wondering if you can give us some, because I know there has been some movement in the ACAS portfolio since we last looked at the portfolio. I know it had some sales and so forth. Can you just give us I guess, sort of a modeling purposes, next year once the deal is complete how we should - what we should think when we integrate that portfolio in terms of equity contribution and the average yield in their portfolio.

Yes. I mean, it’s not something that we’re going to give here. I’ll tell you, our plan is actually to get the 930 financials on both sides certainly completed and then consolidated and get that out to folks as soon as we possibly can, that will be of course something that we’ll help all of you, evaluate the transaction in terms of its accretiveness both to NAV and to earnings. But like I said at the beginning, I guess more qualitatively John of this call, we - the early returns as we worked with American Capital been quite good. They had a lot of assets in place, but they were active on in terms of sales and other activities. And I think, we’re pretty pleased with the results six months and I think, they’ve done a really nice job. I think, we collaborated well together and I think we’re off to a very good start.

Wonderful, okay. And then the last question is if you can give us some framework. When you guys have a big transaction where you’re the lead agent and you retain some and syndicate some. How much are you keeping in those big deals or is there formula where we should think of?

It’s usually not a formula. Click, because it was a publicly announced deal with roughly $1.1 billion deal where we end up holding about a $140 million at ARCC. OTG was a smaller deal of the whole there is around a $155 million. I mean, typically our final holds are governed more by just looking at portfolio diversification. We tend to be the largest investor in those deals and that’s really our goal, but there is no math to it right, when I say typical investments for us today in these larger deals range from 100 million to 250 million a name roughly. So hopefully, that’s a guide post, but there is no sign there.

Yes, Okay. Great. Thanks guys.

Yes. Thanks, John.

The next question is from Arren Cyganovich at D. A. Davidson.

Thanks. Kipp, your comments about little bit more of a competitive environment. I wonder if you could just kind of contrast that with, you obviously had a very big investing quarter and the third quarter in your backlog and pipeline looks like it’s relatively full as well. Just maybe some thoughts on what competitive differentiations you have to that’s generating that type of activity, well you’re seeing some weakening of loan standard.

Yes. I mean, let me comment on the environment afterwards. Just so everyone’s entirely clear. The way that we describe our fundings is anything that we fund to or obviously doesn’t include things that we plan to syndicate and try to make the point in the prepared remarks, maybe I wasn’t entirely clear on it, that $1.5 billion looks pretty large, but what we ended up with net of the $1.5 billion is substantially smaller than that. So I think that there is caution here having spent a lot of time, getting ready for today with the team. I think, the way couple of us were describing it in a lot of different markets or the fundamental and this surrounding economic and political environment feel mediocre and uncertain. And up until maybe a week or two ago, the stock market seem to go up every day, and spreads in virtually every fixed income asset team to tighten leverage multiples in our market were going up, pricing was flat at best if not coming in a bit. And we’re seeing just weaker documents in a more heavily adjusted EBITDA numbers being leveraged and just things that you typically see when number one the market spend and number two is more competitive. I think, you’ve seen new capital come online in the space and I think that capital has to change the marginal deal, have to chase rather the marginal deal. I think, all we’ve emphasized is we’ve got a great franchise that allows us to take leadership position in the deal that we like and we’re doing fewer new deals. We’re focused to increasingly on the existing portfolio and are willing to less fair amount of the deal flow that we’re seeing go to competitors simply because it just doesn’t pass muster for us over the long haul.

Okay, thanks. It’s helpful. And then, in terms of credit quality obviously you’re still kind of below normal in terms of non-accruals in your credit quality is quite good. But we’re seeing I would say, just across industries the amount is weakening. Maybe broadly in your portfolio, are you seeing and I know you said you had about 7% growth in EBITDA on the portfolio, but are you seeing any kind of signs of stress around the areas of the portfolio?

I mean, the good news is we feel like we’re in a very conservative position on just weighted average basis a little bit north of five times debt to EBITDA. We think we got great cushion in terms of loan to value terms of our companies paying us interest again coverage ratios are near three times, 2 ½ to 3 times interest coverage. So there is room for deterioration are focused in this budget. There is room for ways to go up and frankly not create liquidity issues of portfolio companies. And so for us, when we look at fair value in cost of non-accruals that the big numbers really been Educate and Infilaw. And away from that it’s a couple of small cats and dogs to use that term here and there that tend to leans towards those idiosyncratic issues in companies. But overall I made the point on industry selection, I think it’s really important just to remind people that we can be incredibly selective in terms of industry and in company. We think we build the portfolio that withstands a change in the credit cycle which is likely to come. Again I don’t know when, but at some point it always does. So to that being in the right industries and the right companies, and I feel pretty confident having done this for quite a long time together as a team that we built a very resilient portfolio. So we feel pretty good about where we stand.

Thank you.

Thank you.

The next question is from Ryan Lynch with KBW.

Good morning, Kipp. Good morning, Penni. Just following up on Arren’s question about portfolio trends, you mentioned last 12 months EBITDA growth is about 7%. My question was have you seen that decline, recently we’ve seen some other statistics out there than they look like the third quarter specifically year over year might been a little bit weaker. So obviously the 7% last 12 months EBITDA growth of 7% that’s fairly strong, but have you seen any weakening in those numbers over the last couple months.

No, not particularly, and we actually spend a fair bit of time looking at kind of Q3 evaluations at our company, but also across just our credit portfolios at Ares here. And actually Carl and Jan and others we’re talking about public companies meeting or missing earnings in all of that, and how we’re comparing. I think, generally we see companies that are up year over year but maybe a bit behind budget, but it’s probably reasonably on either side of 50% of beating budget or missing budgets. When I think that’s in line with lot of the credit portfolios that we’re seeing across areas and also I think what the public equity markets are seeing. So we don’t view it as getting worse quicker. I don’t know if things slowdown again, just because folks are nervous around next week’s election. I continue to believe that they are. So we’ll see if any of those trends reverse after that’s resulted into a new year. But now, we don’t see any accelerating of the decline, if that’s the question, Ryan which I think it is.

Yes. Okay, great. And then 73 million of commitments quarter to date, that’s pretty light for what you’ve historically done. I know this quarter was very big, the 1.5 million for reasons you described, originating deals and syndicating some of them out. But do you expect that number to pick up from the $73 million quarter to date to finish more what you guys have kind of historically averaged over the last couple years of anywhere from $500 million to $750 million?

I mean, that’s usually where we end up in a - in an average Q4. Backlog and pipeline would indicate that there is a lot of deal flow out there that were active on. But we came to the point being selective backlog or things that we generally speaking things that we’re going to get closed. Pipeline is an available universe of probability of adjusted things that we are working on, some of that might go away, some of them we might lose on terms whatever maybe. So I think it will be a reasonably busy fourth quarter, I don’t expect to be an off the charts busy fourth quarter, because of the election in particular, but I think it should be in line with past Q4, there is nothing unusual going on.

Okay. And then now that you guys have completed a couple large transactions, the Qlik, American Seafoods, and such, are you guys seeing any increased deal flow or increased discussions with sponsors that have a particularly large deal trying to bring that to you all, considering you guys have done several in the past, they seem like they’ve went pretty well, guys that are wanting certainty of close, has that deal flow or discussions increased recently?

Yes, I mean, I think that Qlik was definitely a watershed deal where folks said, wow, I didn’t realize that sort of financing was available. We’d actually heard that comment specifically. So yes, I do, I mean I think that the fair way has widened substantially for direct lending, particularly for skilled platforms. And we get the question a lot about why is size bigger, these are prime examples of much larger, much higher quality borrowers coming to us instead of to the banks and looking to us to write very substantial transaction. We’re just - we announced the other day that we are supporting $ 1 billion plus buyout in a first lien, second lien deal for a company called Ministry Brands, but as sponsor called Insight Venture Partners is buying. It’s another $1 billion financing that I would tell you three years ago, I can’t imagine would have come to us, I can’t imagine it would have gone away from the banks, and the reality is we’ve been an incumbent there for a while. And we’ve been able to lead that deal and. And it’s always been our expectation that there are more behind that first deal that we did and we’re seeing evidence of that. I think we’ve built all the capabilities that we need to have our counterparties have a lot of confidence in us leading those transactions. Certainly doesn’t mean that we’re doing them alone, we have partners in these deals. And it’s not like we’re committing a $1 billion with all of the risks are occurring to us. So we’re able to bring in early co-agents on the deal and de-risk the situations, but they’re very, very attractive from just client perspective recurring business, perspective and obviously an economics and these perspective. So yes, I know we’re seeing more of it, we intend to continue to address that where we like the credits and we’re excited about that development.

Okay, great. Those are all the questions for me.

Okay. Thanks, Ryan.

The next question is from Doug Mewhirter at SunTrust.

Hi, good afternoon. Question on the structuring fees, which were very strong this quarter, and I assume a big chunk of that was from your syndicated deals to be expected. I had a question about how structuring fees come out with SDLP. I remember when you the SSLP was growing, you would earn structuring fees on a lot of the loans you would arrange for the SSLP. I was wondering, if the SDLP had any contribution to that nice structuring fee number this quarter.

Not in this quarter, it’s mostly just regular way and then that couple of larger deals that we did. But we do get upfront fees on new SDLP deals that we do from here, the same way that we would on a regular deal. I don’t know, if you want to add to that Penni? Yes.

Just that the way the fee structure works in sharing is similar to what we had on the SSLP.

Okay, thanks. That’s all my question.

Okay, Doug. Thanks.

The next question is from Chris York at JMP Securities.

Good morning, guys, and thanks for taking my questions. So given the growth in the average EBITDA of your portfolio company in the third quarter, and then maybe your ability to lead large buyout deals, have you guys had to concede to sponsors any of the issuer friendly terms that exist in either the high year or the BSL market, like EBITDA add-backs or covenant wide in the structures?

I mean, look, I think generally speaking the larger companies get the more large cap sponsors expect sort of broadly syndicated lending terms. But again our average EBITDA is kind of - I think it’s mid-50s today in the Q3 numbers were up to 66. So we’re not quite there, most of the broadly syndicated type of terms kind of creep in at the $100 million of EBITDA plus. So we’re not there. I can’t say that there is not a modest difference between 25 million of EBITDA and 75 million of EBITDA, because there is a difference. So you’re always getting pushed on that and obviously trying to hold the line.

Okay. And then maybe staying on the competitive environment a little bit. So we’ve talked a little bit about the incongruence in demand for private debt funds and then the demand for public VDCs. So I’d be curious to learn whether growth in private debt funds has affected your credit filter more broadly? And then maybe ability to win deals, some of these larger leads, at the VDC as fund raising for private equity platforms has been rather robust?

Meaning for new entrants into the private debt space.

Yes, I mean, there is more new entrants, but also just private debt fund raising is up year over year already in 2016. So I’m seeing how that is flowing through to the largest VDC, being you guys.

Yes. I mean, we’ve raised money on the private side as well. I know others have too, there is definitely been capital flowing into the space. The way that I think about new entrants is they tend to be small and they tend to be adversely selected on new deal flow. So they just don’t have the skill of platform in terms of origination breadth and reach. We have people on seven offices, we got almost a 100 people dedicated to the business, it’s a pretty different than what you would see from some of the new guys, and when you’re a new guy you have to justify your platform and explain who you are and explain your philosophy or no, even if you have relationships from past firms it’s never the same. You have no evidence to show your counterparties how you’re going to act in situations that don’t work out as expected. So the new entrants frankly tend to focus on the smaller companies and then we don’t see them much. Lack of BDC fundraising versus private side capital has much of an impact. I mean, our compensation on the first lien side remains very solid. It really tends to be ourselves, [Galovan and Terry’s] [ph] in most first lien situations. And on the junior capital side it’s a bit more fragmented, but I would tell you it’s probably a collection of five to 10 people that we bump into quite off and then the nature of that competition hasn’t changed much.

Okay. Fair enough. And then most investors in Ares are aware of the positive sensitivity your balance sheet has rise in rates, but I’d be curious given the context that three months LIBOR here is just below 100 basis points, and then maybe a potential 25 basis point rate hike. What is the incremental increase to net investment income from that 25 basis points and of course that the 100 basis points you disclose in your docs.

Yes. I mean, we have to do the math on that. You can see at least the range of values in the documents from where we are now. So a 100 basis points is a net income effect of $45 million, but I don’t know where the cut is for the 25.

Yes. I’m looking - yes. I mean, I’m looking at something here that’s - its de minimis at the 25 basis points is not going to move the needle for couple million bucks. Remember that our floating rate liabilities have actually been a touch more expensive here over the course of the last few quarters as LIBOR has gone up and we haven’t got the - gotten the benefit on the asset side. So obviously getting through 1% whenever that happens will start to at least give us the asset side benefit. 25 basis point rise we think creates somewhere $3 million, $5 million of incremental net investment income which I don’t think isn’t particularly material, it’s a $0.01. But if the longer term trend is to higher rates, I think we’re very happy and it’s very good for our company.

Yes. That’s helpful. Lastly, maybe strategically. So as you noted the ACAS acquisition combines the two largest BDCs and then pro forma for the purchase your market capital be I think some $98.5 billion, which would represent roughly about fourth of the publicly traded BDC market. So I’m curious to learn how you’re thinking about the responsibilities incumbent to lead BDCs as investment vehicle and then maybe more broadly private debt towards future growth.

That’s a difficult question. I have a lot of thoughts on that. So we can catch up off a public earnings call maybe on some of the things that I think about the industry and where it’s headed. Look, it feels like a fair bit of pressure, but I think, we’re more than happy to try to handle it. Look, it does put us in a different discussion I think than lot of the other companies in the space. I think that we’ve shown our shareholders over very long period of time that we’ve done what’s right for them, as our company’s grown. We’ve continued at our external manager to put significant resources behind the growth in assets at our company. We started 12, 13 years ago, I think we had eight people and we’ve got about 100 today, we’re in different industry verticals than a whole lot of folks we have a much, much broader business but geographically in terms of the types of deals that we’re doing. So I’m not worried about running the business at all from the asset perspective, I think we’re just growing into what’s a very significant growing market. I think there are a lot more complicated questions about and how shareholders think about this large business, I do think that there are real benefits to our shareholders of the larger market cap, and we hear this all the time folks in ability to buy and sell positions in the company, the aftermarket liquidity in our stock generates real value for them relative to other things that they can do with capital. The scale of our companies allowed us to do, I think better than others in the space on the liability side. And you saw that with the bond deal that we did this fall. So I think beyond that there’s a longer conversation about what it means for just being a larger market cap company talking about things like future equity issuance if we ever have any, if there’s you know an ability to be more adept on buybacks to be more thoughtful there and being a larger business. So it’s a really great question, Chris. I think, I don’t want to kill the earnings call with saying any more, but we take their responsibility seriously, I think we’re up for it and I think there are a lot of issues there that we’ve shown, we’re in it to do right by the shareholders and we’ll continue to operate under that framework.

Great. A couple of those characteristics are helpful, and I realize that we could probably have our own individual conference call on that. So that’s it for me. Thank you very much, guys.

All right. Thanks.

The next question is from Rick Shane at JPMorgan.

Hey, Kipp, thanks for taking my question today. Most have been asked and answered, but I guess the one thing we should talk a little bit about is higher rates, and obviously your balance sheet is constructed to be asset sensitive, and that’s been a big part of the strategy for a long time. But there is a tradeoff there which is that ultimately that will put more pressure on your credits in terms of higher borrowing costs for them, and reduction of cash flows. Can you talk a little bit about how you guys think about that and whether or not your portfolio companies are able to hedge out any of that interest rate risk?

They do. So typically most of the mid-market borrowers most in broadly syndicated borrowers are required to hedge interest rate exposure to the tune about 50% under regular way credit agreement. And again, on our portfolio, Rick, we think there’s so much interest coverage margin today, up into the kind of 2.5 to 3 times that unlike maybe some other downturns, where rate increases really affect collateral from a liquidity standpoint, we don’t see that as the driver of a worsening credit cycle. I think there’s plenty of room for rising rates. Just remember, right, we have LIBOR floors on our assets most of our companies are already living in a world, where they pay LIBOR equals 1%. So they hadn’t been living off the 40 basis point LIBOR, and also the duration of our assets is reasonably short. So most of our loans are out somewhere between two and four years. So I think the companies will react appropriately to the extent they see rapid increases in rates, which I don’t think anybody expects, but if they saw that I think there would be plenty of room to be nimble and make changes as needed. So that’s not one of the things that keeps us up at night.

Got it. That’s perfect. Thank you.

You’re welcome.

The next question is from Robert Dodd at Raymond James.

Hi. Just going back to the portfolio EBITDA question, you gave us a lot of color on that, but you did say it has slowed verses where it was in terms the EBITDA growth a year ago that hasn’t been recent. Can you give - any more color on like any industry vertical that particularly stand out, I mean there’s obvious candidates, but is there anything vertical wise where that slow down modest as has been stood out a little bit more than others.

I mean, I think when you look - I think our portfolio generally works in line with other portfolios vis-à-vis industries, right. Industries tend to kind of walk together even though companies have to idiosyncratic risk. So the first - industry that showed real issues was certainly oil and gas. And you know folks say, what inning are we in or - the oil and gas, that came in well into being over - or extra innings or whatever you want to refer to. I mean the percentage of defaults in CCC oil and gas high yield mains is extraordinarily high and continuing to go up, right. So we’re already seeing what’s happened there. Being underexposed there has helped us. Mining and metals has been a place that’s been tough, where we’re not. I think some of the industries that we do participate in where I think folks would generally say there’s weakness, definitely retail. And retail is tough these days, brick and mortar retail, in particular with just changes in the way consumers and buying patterns are working in terms of online retail. Restaurants inevitably I think see the weak consumer, if the consumer is slowing down, which I think consensus is they are. You’re seeing a little bit of weakness there. But we’re reasonably happy with the way the portfolio is sitting. I mean 7% year-over-year EBITDA growth relative to what you’re seeing. I think another portfolio isn’t broadly in the market as something that we still as very healthy and doesn’t really give us significant concerns.

Got it, got it. Thank you for that. On the syndication side, for lack of better term, can you give us a little bit of color about how the fee income works then? In the sense, obviously if we look at $1.1 billion financing you kept about $150 million, so you syndicated out about $950 million. What’s the - obviously, you get arrangement fees on the whole thing and you keep some skim extra. Can you give us any color roughly on some ballpark numbers on how that plays out? I mean, do you keep 50 basis points on the $950 million that you syndicated out? Or any - obviously that would be a little high, given I know what the capital structure for the whole quarter. But any color there would be really helpful.

I mean, on underwriting that I think upfront fees, depending on how large a deal is and all of that are pretty broad. I mean, gosh, you could charge anywhere from maybe 3 to a 5 point three if you’re lucky in certain deals. And it really depends on the value that your partners are bringing to you in a transaction. It’s all about de-risking your transaction. So you’re able to skim more income, the more risk you’re willing to take in syndication that I assume is obvious but I’ll just state it, right. So if you’re doing a full underwrite and you’re getting something rated and you’re selling at the market, you’ll retain more skim income versus if you’re bringing partners in to be co-lead arrangers and then moving towards something that looks more like a club transaction. I just can’t say that there’s a number that’s a general number that we end up with in different deals. It just varies from deal to deal based on size and circumstance.

Okay. Got it, got it. Fair enough. On kind of following up on that and this is my last question, obviously it’s been an area you’ve been looking to grow for a while. You mentioned you’ve widened the fairway now after you’ve done a couple of these big deals. I mean, is that - for lack of better term - is this a business that you are now going to be running on a budget or purely opportunistically?

I mean, I think this is - you should consider this to be part of our business. This is something that we’re very clear, hopefully, with the team for sure, but also with investors that, when we saw GE sell their business it really opened the floodgates for our ability to change the nature of our business. Before we were partners with them we’re much more active on the senior side. And since, not being partners with them in SSLP we’ve been very, very active on the senior side. We have a team that’s been doing this for 20 years, long before we got here at Ares and we have every capability in-house needed to do this. So this is very much part of the business plan and very much very much part of the budget. And these larger deals keep showing up and I don’t think it’s - I don’t think it’s by chance. I think it’s because we’re targeting these deals and I think our clients view this as providing real value in bring them the service, so.

Got it. Thank you.

Sure.

The next question comes from Christopher Testa at National Securities Corp.

Hey. Thank you for taking my questions, guys. Just a question on Infilaw holdings with the preferred on nonaccrual at 34% of cost, just curious if you could discuss what the exit opportunities look like for this company or for profit out in general?

I mean, not to comment too specifically on something that’s obviously a more difficult situation, the portfolio, and something that we’re working with that company on. It is a difficult sector. I don’t expect many people to achieve near-term exits on many or any of these assets. I think that changes in regulations and for-profit education have made people go back to the drawing board a little bit, need to rework their business, which is what we’re doing and as well with our partners. So beyond that I think we’re just going to have to be patient and apply all the resources that we have here to a name like this. And that’s what we’re up to for now. And that’s what we’re going to stick to doing. So I don’t I don’t have any expectation of near-term exit from that name.

Okay, got it. And just curious, are you seeing better opportunities, not just in terms of pricing obviously, but in terms of in terms of structures, industry, whatnot? And secondly relative to first lien have we seen or are we in an environment now where first lien is kind of been bit up too much as people kind of have the flight to quality with the volatility in markets?

Yes, I don’t think necessarily. I mean we always get the question of first lien versus second lien. We do both. We choose by company. We choose based on risk adjusted return in each particular name, in each particular deal. So I don’t see any big changes in the relative value there. We’re still believers that both of them work. I think second lien pricing and second liens come in a little bit. It’s been under more pressure. During this period, as you know there’s been limited new deal flow. So I think we’re pretty happy with some of the second lien deals that we did over the last twelve months and have been more cautious over the last quarter or two.

Got it. And just the backlog number that you cited earlier in the call, did those include the existing portfolio company names or are those all new deals that you’re potentially looking at?

Both.

Okay. And is it fair to say that that’s more heavily weighted towards your existing names, given your commentary that that’s your preference.

Yes, I’m looking at it right now. Certainly the backlog is. The pipelines always going to be a little bit more oriented towards new stuff, because again, that’s still subject to a diligence filter which a company may not pass. It’s subject to getting final pricing in terms and documentation and all of that done, which is higher risk than something that is in backlog so…

Got it and last one - oh, I’m sorry about that.

No, no, go ahead.

I was going to say, the last one for me, just a housekeeping item. Just should we expect further professional fees related to ACAS in the fourth quarter?

Yes, we’ll have some. I mean, we’ll have a little bit ongoing through the closing and into next year. But like I said, last quarter nothing near what we had in Q2, as we move toward…

Right, okay, that’s all for me. Thank you for taking my questions.

You’re welcome.

The next question is from Hugh Miller of Macquarie Research.

Hi, thanks for taking my questions. I definitely appreciate some of the color you provided on the energy and consumer oriented verticals that you gave. I was wondering if you could provide a little bit of insight on the trends you’re seeing within the VC lending that you do. There were some initial data that just kind of selective or suggested some selective credit extension in the third quarter. Are you guys seeing a typical ramp in 4Q production, that we tend to see in that industry? And are there any areas of concern that you’re seeing within the VC lending?

Yes, I mean, I think our venture lending business isn’t necessarily like others. And it has a lot of commonality with others and that you tend to provide kind of non-dilutive shorter term loans to companies between equity rounds as they build value. And use of proceeds is obviously just a bridge to the next round. We’re seeing valuations in venture come down. We’re seeing that the next round of equity capital, which is typically our take-out, take longer. So I think that business is a little bit choppier. We’ve added a non-accrual or two over the course of the year. And I think that’s representative. But again it’s a pretty small portfolio for us. It’s about $270 million. And even if you have a couple that it blips along the way it’s just not something that’s all that material for us. We like the business. It’s a nice part of the strategy. And I think venture is going through a time where you need to be more cautious and be paying attention to the fact that evaluations are coming down and capital isn’t flowing quite the way it was maybe 12 months ago. But nothing of great concern there to you.

Got it. That’s very helpful. I appreciate that. And I guess, just as a secondary follow-up, as you’re moving a little bit further along working with ACAS, is there any additional insight you might be able to provide in terms of the expense synergies that you think can be realized as we head into next year?

I mean I think again you’ll see a lot of that come through. And we’re trying to get it out again as soon as we can on these pro-forma financial results for 930. So if you wouldn’t mind, why don’t you let us distribute those? I’m sure everyone’s going to take a good hard look at them. We’ll be more than happy to follow up after you see them.

Yes, I mean, we do expect we’ll have some expense synergies, just like anything. We have one Board of Directors, one audit, those types of things. But most of those will actually be seen on the com as we go into 2017, and the historical pro-forma financials at least on the income statement side aren’t that instructive, because of the way the rules are under GAAP to include those. And in fact, those don’t allow you to include expense synergies, when you look backwards oddly enough. I think it’s going to be something that as we put the two companies together and go into 2017 we’ll start to be able to give you a little better lens that, yes, as with any strategic acquisition you would expect to have some cost savings on the G&A.

Yeah, absolutely got it. Thank you so much.

No problem.

The final question is from Terry Ma at Barclays.

Hey, guys. So with more combined capacity to invest post ACAS, how do you guys actually balance your cautious view that you have right now with the need to use that increased capacity and grow looking out a few years, if presumably the economy is not going to improve dramatically from here?

Yes, no, it’s a good question. Some we’re thinking a lot about certainly being selective on new deals. And look I think it’s going to be important for us to think about other things that we can do in the business. We have expanded over the years into different industry verticals. There are ways, obviously, to use I think the 30% basket more creatively with the pro-forma balance sheet giving us capacity there, Terry. So we’ve been focused obviously on making sure that we felt good about where we were six months in, having gotten the merger together and evaluating where we were vis-à-vis results against the due diligence framework. And we feel great about that. I think that the focus today is just really pushing us hard as we can towards closing and getting this done. But, yeah, in the back of my mind that’s - in the back of all of our minds that’s something for 2017. But it’s a good question. I mean you raise a good point. We’re hopeful that the market and time comes our way. I think rates going up will help I think. More defaults which are likely, again we think more for others than ourselves. Based on the portfolio that we’ve built will widen spreads. And we think that that should hopefully improve the environment. But, look, we’ve been saying that and hoping for that for quite a while. And it’s frankly about the same as it was four quarters ago. So sometimes it just takes a little while for the reinvestment environment to improve meaningfully and I hope we’ll get that right with the pro-forma merger into 2017 and beyond. We’re excited about the merger. We think there’s real accretion out of the gates. But the long term benefits I think may outweigh even the short-term accretion. But it’s continued upon us, it continues to put people behind the business and find the best investment opportunities that we can. So that’s what we’re thinking for next year.

Okay. Got it. That’s helpful. That’s it for me. Thanks.

All right. Thank you.

Would you like to make any closing comments? No? Ladies and gentlemen…

No, I don’t think we had any. So other than we’re happy to close out. And you can close this out operator.