Good afternoon. Welcome to Ares Capital Corporation's First Quarter Ended May 31, 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. As a remainder, this conference is being recorded on Wednesday, May 3, 2017. 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 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 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 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 Web-site. 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 related 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 first quarter ended March 31, 2017 earnings presentation is available on the Company's Web-site at www.arescapitalcorp.com by clicking on the Q1-‘17 Earnings Presentation link on the homepage of the Investor Resources section. Ares Capital Corporation's earnings release and 10-Q are also available on the Company's Web-site. I will now turn the call over to Mr. Kipp deVeer, Ares Capital Corporation's Chief Executive Officer. Please go ahead.

Thanks, Alison. Good afternoon and thanks to everyone for your interest today. I’m joined by members of our management team, including our President, Mitchell Goldstein; and Michael Smith; and our Chief Financial Officer, Penni Roll, along with other members of the finance, investment and investor relations teams. You will hear from both Penni and Michael later in the call. Let me begin by reviewing our first quarter’s results and activities and the I will update you on the American Capital transaction and highlight our strategy going forward. This morning, we reported first quarter core and GAAP earnings per share of $0.32 and $0.28 respectively, and this quarter is of the first to include the impact of the American Capital acquisition which closed on January 3rd. GAAP earnings included $0.08 per share of one time and other cost related to the closing of the American Capital acquisition. Core earnings were below our historical levels driven by several factors. Continued strength in the equity and credit markets, combined with significant inflows into the leveraged finance arena created a more difficult investment environment and we chose to close fewer deals that we’d expected. As a result, earnings were impacted by lower fee income and less interest income from new investments. In addition, as we highlighted during our call last quarter, we on boarded a lower yielding portfolio with the American Capital transaction which included significant non-yielding private equity investments and other nonstrategic assets that we intent to exit. Finally, the wind down of the SSLP has continued and as previously discussed, this has been a headwind for the company. We see the core earnings impact from the American Capital acquisition and the SSLP wind down in short-term in nature, as we make progress in transitioning these assets, it provide significant opportunities for earnings…

Thank you, Kipp. Before we go into the earnings for the quarter, I’d like to start by taking you through the impact of the American Capital acquisition. As Kipp mentioned, the transaction was accretive to our net asset value of closing. There is more detail in the notes for the financials in our 10-Q filing but to summarize the fair value of the net assets we acquired totaled $3.4 billion which exceeded the cash and stock consideration we paid by $54 million. This translated into net asset value per share accretion at closing of approximately a $0.11. The net assets we acquired, included cash of $960 million and an investment portfolio of up $2.5 billion of fair value that had an aggregate weighted average yield of 7.4%. The fair value of the investments at closing became our cost base just on these assets. The net assets acquired and their related earnings are reflected in our financial results for the first time this quarter. So, I will note the impact of the acquisition as we go through the earnings discussion. Our basic and deluded core earnings per share were $0.32 for the first quarter 2017, as compared to $0.42 for the fourth quarter of 2016 and $0.37 for the first quarter of 2016. Our basic and deluded GAAP earnings per share for the first quarter 2017 were $0.28 including net gains for the quarter of $0.06 but after a reduction of American Capital acquisition related expenses of $0.08. These expenses included certain one-time expenses related to the closing and also included higher administrative fees as we integrated the acquisition. This compared to GAAP net income per share of $0.24 for the fourth quarter of 2016 and $0.42 for the first quarter of 2016. As Kipp mentioned, our lower core earnings in…

Thanks Penni. I will spend a few minutes reviewing our first quarter investment activity detailing portfolio performance and providing a quick update on our backlog and pipeline. As Kipp mentioned we focus on originating a very broad set of mini market opportunities with the goal of investing the best credits where we find compelling risk adjusted returns. Historically we are close less than 5% of potential opportunities however that number today is meaningfully lower. During the first quarter we made 20 new commitments totaling $864 million and had gross funding of over $900 million which includes existing unfunded commitments. Given the environment we have discussed earlier we are focused on more conservative first in debt investments which accounted for 74% of new commitment activity. Furthermore, we continue to emphasize using our capital this core to meet our existing borrowers and this represents nearly 55% of our first quarter investment activity. During the first quarter we excited $836 million of investment commitments including $284 million of investments acquired in the American capital acquisition. The first quarter exists from the American capital portfolio included $103 million from the sale of certain assets previously owned by American capital asset management or ACAM which was merged into Ivy Hill asset management closing. ACAM's net asset at fair value totaled $179 million net closing consisting primarily of GP interest in managed funds receivables and other management contracts. Importantly the most significant ACAM assets remain at close were exited in the first quarter we expect to realize the remaining asserts overtime. As of March 31, our total portfolio company account rose to 316 which include 87 new portfolio companies that we acquired from the American capital. Our portfolio mix by asset classic experience a modest increase in that equity investment from approximately $980 million to $1.4…

Thanks Mitch. Well first quarter earnings were below our expectation as we intentionally slowed our investment pace due to market environment. We don't believe they will reflect the longer term earnings power of the company. We are focused on being long term towards of our investor capital and have not lost sight of the investment and operating strategies that's driven our success over the past 13 years. We feel confident that a slower pace of investing is warranted today. As it means positioning the company for less volatility long term and the opportunity for stronger fundamental performance and higher running future periods. In addition we continue to be confident about our plan and executing on the American capital acquisition and we feel that we have multiple levers to pull to support earning growth in the future. That concludes our prepared remarks. Alison would you please open the line for questions.

Certainly and thank you. [Operator Instruction] Our first question will come from Jonathan Bock of Wells Fargo. Please go ahead.

Good afternoon. Thank you for taking my question. Just a few here. Kipp you mentioned slower pace and that is a prudent measure in light of where spreads and more importantly junior debt spreads are today can you walk us through the net fee impact given the fact that your book fees are up front to the extent that you take a more conservative posture on deployments one could expect to one might expect the potential for net operating income to fall below the dividend even including the fee waiver. How do you look at full dividend coverage. Is it something that you will strive to do and can likely expect or would you expect NOI to fall below the dividend based on your conservative posture overtime.

Yes, I don't expect it too long here Jonathan although thanks for the question. It certainly did this quarter. And I think the good news is we think that there is lot of earnings power in the company that will get it back to or above the dividend level and I try to make that clear in the prepared remarks but of course it's really all about rotation out of a handful of assets as I mentioned we have been selling assets at American capital has actually improved the yield on the portfolio between closing and today on American capital overall. But I would tell you we have got about $1.1 billion of assets that we acquired that yield roughly 6.7% that just aren't going to make the cut here and the ability to re-position that 1.1 billion into higher yield portfolio creates earning momentum that get us back to the dividend level and I think the second key point that I made in the prepared remarks is we are finally fortunate to be getting towards the end of that result fee never having had an any loss to end more quickly we had to just run the natural course and based on repayments it seems the natural course is we start to get some capital back based on our forecast there in Q3. And we can take that money and we can redeploy that into something that earns a lot more than today's 6.7%. The $3 billion of assets and you can choose whatever number you want to think about where we can drive yield but driving it to the current yield on the portfolio of 9% you pick up quite a lot of earnings and caveat that by saying it doesn't even consider the fact that with pay down and we substantially free up 30% basket to do things that can be even more interesting than things regular portfolio assets in terms of structures and other thing.

No doubt Kipp that I believe that there is an opportunity to rotate the portfolio but I guess the question is what new issue spreads are and two whether or not there is enough attractive new issues out there to effectively deploy such a large amount. So if we look at it I mean you are talking about 7% where are you originating on a unit tranche asset today in the current market today firstly in senior secured, would it be as high would it be about 100 basis points higher than 7% or in line with 7%.

I mean I think that's a reasonable estimate. Remember we do more than just unit invest. I am looking at backlog and pipeline and our guys are happy to hand over to me but we talked about the size of the pipeline in the prepared remarks but roughly billion dollars of cumulative value of backlog and pipeline I see ranging kind of 9% to 10% believe it or not so the market is tough but I think we continue to differentiate with our platform and with our scale and we are funding enough to do. But it is the good one and we are not going to know until we get there but right now I think we are still finding enough to do. The good news too is we are able to have quite a lot of earnings although they are not core earnings to the company, just monetizing a lot of our equity positions and lot of assets that we bought at discount to integrate market to be a seller. So I think, number we generated 100 plus million dollars and gains in the month of April. I think it's pretty good. So we continue to do that.

Got it and then just one last question as it relates to structure products into the extent that I think I noticed only about $20 million of sellers effectively sold and given the spread compression has occurred both in the middle market as well as the broadly syndicated market which of your earnings contribution from what is a completely amount of CLO equity that likely gets pinched the hardest in light of the fact that leverage in those securities is the largest?

Yes again, I mean longer term we are sellers of the asset there has been a modest increase the improvement in that market so we have been selling some but not prior selling it. They do come with income so it's a way for us to continue to generating income in the new term on these assets and that they pay double digit rates of return but we are pretty significant managers of CLOs and investments and other folks who are still -- we understand the volatility of this cash flow which will lead us out of that portfolio in time.

Last question and I will jump off. Stepped into support this transaction and is also looking folks would imagine that you are taking a very long term perspective to the extent that you and Mitch and Mike didn't find what you would consider to be attractive opportunities to deploy capital keeping earnings high do you believe that there is the potential for greater fee waiver to sustain the dividend at the current level beyond the $10 million to ensure the dividend and fully recovers from earnings?

I would expect, that there is we found $100 million fee waiver from our external manager to support the transaction so I think I will just say that running [indiscernible] capital corporation is a very important business for Ares management. That being said we haven't independent board that we discuss our free range with we would be talking to them, we would be talking to the manager I am not worried that I am going to have that conversation. I think when we look forward we have enough levers to pull against such that will position the company that we want to have that conversation. Let me just remind you that we don't have the highest fees by a wide margin in the industry. So feel our investors are little long period of time have gotten pretty nice return on stock and we look to past couple of quarters, we are res-positioning things to delivering those.

Yes great. Thank you.

Our next question will come from John Hecht of Jefferies. Please go ahead.

Morning and thanks very much guys. I just I guess I am trying to figure out the earnings capacity of the combined businesses now and what might be helpful is can you tell us what the I guess if you have this ready, what's the differential yield of the Ares portfolio versus the a cash portfolio this point or maybe even in another way you can say what was your yield to-date and your margins have been in the asset portfolio?

So we are I mean what we disclosed John and good morning to you too is our portfolio total investment had roughly 8.3% yield. 9.2% on the debt and income earning securities. A cash overall had a 7.8% yield. So the blend is modestly down to 8.2% but again, I think that the earnings power story just try to be painfully clear as again billion one that earns 6.7% that's for sale a billion nine today earns 6.5% and back to Jonathan Bock's question take the three billion and reinvested it whatever you think makes sense. But the overall company today again is earning about 9% on its debt investments just from a pure yield perspective without fees and without gains and it goes without saying too just remember that billion nine of SSLP because of the 30% basket asset actually used to earn 50% of that earned 20% so if you take the 9% across the 3 billion and you adjust it my basic math in going through it over the last couple of months has been you can generate $70 million – $80 million of incremental earnings on a company with 425 million shares that's on a gross basis. So that's how we think about the re-positioning and what we are aiming to achieve.

Okay that's super helpful and…

One other thing John, we can decide whether we think rates are going up or not but LIBOR has helped a little bit and this is asset sensitive company so even the market remains tough with the modest increase in rates and res-positioning I think we [indiscernible] from where we were prior the transaction.

Yes, of course, and there is -- as well. So that's the top line stuff and that's – you definitely helped us process that. The other question I had was on the cost side. I know there was limitation in your ability to talk about synergies cost saves and the proxy and so forth as you guys is there any more with the chap there, anything you can discuss in that front?

Sure. As we have mentioned in the past obviously we are going to have synergies in the cost for the things just to run the company generally. So the cost of an audit, the cost of public filing the cost of having so there are synergies it doesn't decrease our base line cost but we can bring in 3 billion of assets without a lot of incremental cost to our expense base today. So we should see us running more efficiently from an expense ratio perspective on our core G&A cost.

Alright guys. That's very helpful. Thanks a lot.

Our next question will come from Terry Ma of Barclays. Please go ahead.

Thank you guys. Can you talk a little bit more about how you balance the desire need to rotate out of the legacy investments with what you are actually seeing in the market environment today. Looks like you are pretty cautious. But what if the environment doesn't change in the near term you just hold on to the 1.1 billion of assets?

Again the 1.1 billion earnings 6.7% so we could sell it all tomorrow I think we can reinvest it [indiscernible] significantly in access of that so I think that we think about the 1.1 billion monetization which you get in the combination of firstly, secondly mess preferred equity as being opportunistic sellers when it makes sense against so we have got a whole handful of the control our portfolio that we are currently kind of in the market existing right now some of the other things will hang around longer but I don't retaining that 1.1 billion because it creates earning is something that we are considering again because the yields are so low on that portfolio.

Okay got it and what portion of the 1.1 are non-qualified assets?

I am not sure, I have the answer of that offline. I think it's pretty small. I have the composition firstly and secondly that’s preferred equity etc. 300 of the 1.1 billion. Freeing up is 30% basket story again is the reduction of assets…

Okay. Got it. Can you give us a sense of the pace return about SSLP capital?

What it's earning today?

No just the pace of return. Instead of start to pay back in 3Q so I am just trying to figure out how quickly you guys can actually free up more capacity in your 30% bucket.

Sure. Well, we have 1.9 billion of [indiscernible] senior notes roughly billing -- does have 12.5% of the investment so we are forecasting by the end of the third quarter so I guess the billion will repay per quarter.

Okay. Got it. Thank you.

Our next question will come from Ryan Lynch of KBW. Please go ahead.

Good afternoon. I have a couple of questions on the dividend. So if you exclude Ivy Hill dividend income was about 14 million which is up over prior quarters is that increase due to on-board into the ACAS cash investment which may have more equity investments maybe higher dividend payers and is that 14 million kind of a good run rate going forward?

I think that dividend income way from Ivy Hill is represented with the fact that we are seeing more dividends coming from our equity investments generally in a good market. It's drilling not a cash driven look out last quarter.

Yes. This can be a little bit lumpy so we have seen higher dividend singularly from companies both in Q4 and Q1.

Sure. And then one more on the dividend also. If you look at Ivy Hill, you guys have always paid a $10 million dividend on a quarterly basis, you basically paid that. With Ivy Hill taking on a few more assets from ACAM, do you guys expect that dividend distributes from Ivy Hill to increase at all?

We don’t, because unfortunately what we have left there is kind of drips and drabs of things that we’re exiting. So, again what was the increase in value at Ivy Hill was kind of twofold. There was number one, 70 million of assets contributed from ACAM. I think Mitch mentioned this on the call, but it’s accrued carry-in funds which we’ve sold but have held carry. We got value and some contracts that we retained, some assets to be sold and other kind of just random here and there assets, differentially don’t have any income. So, that’s not going to increase the dividend. I think in time, the second source of the valuation increase which was a $50 million investment that we made in Ivy Hill to expand their assets under management, their ramping new vehicle there had something that will come with income and will just determine what the company’s capital looks like overtime as to whether dividend increase because of that investment is warranted or not, but it’s probably too early to guess on that one. So, for the time being let’s say I wouldn’t expect anything different, Chris.

Okay. And then as far as the SDLP that ever since you guys kind of initially funded that the assets scenario then, pretty stagnant, so no growth in that front. What is your outlook for actually growing the SDLP, its subsidiaries? Might be a big earnings driver that could be a big offset and has been somewhat of an offset to the wind on the SSLP. So, are you guys expecting further earnings growth in the SDLP in the near term?

Yes, we are and is very active in the market. It’s been successful ramping continue to have backlog and pipeline they were excited about. We were a little disappointed, we’d enclose the new deal in SDLP in Q1 but you’re right, it is a higher returning investment, it’s obviously meant to come in on the heels of SSLP, being terminated then winding down. So, yes, I mean, I think it’s one of the numerous sort of bright lights that potentially if this for us to drive earnings.

Okay. Those are all the questions from me. Thanks.

Alright, thanks.

Our next question will come from Chris York of JMP Securities. Please go ahead.

Good morning, guys. So, Ryan just asked a question on Ivy Hill and the dividend run rate. But I’m curious whether you will be filing separate financials for Ivy Hill going forward or is the company not met the conditions of a significant subsidiary?

Yes, it hasn’t.

It hasn’t met us and so there’s no requirement to file those. And keep in mind to Ivy Hill on a relative basis to the aggregate portfolio, stay pretty confident. So, it’s kind of even smaller as a percentage of the portfolio relatively speaking to before the transactions.

Got it. And then so we know that Ivy Hill was awarded the ACSF contract. Now, will the income there be offset by any operating marginal operating expenses or would all that income fall to the bottom line?

Yes, I mean, clearly there are cost related to running a fund. So, while there is a management fee that comes with managing ACSF like comes to Ivy Hill, but also there are expenses that have to be incurred to manage that portfolio. So, there will be expenses deducted from that. So, I wouldn’t put a lot of value into the Ivy Hill ACSF contract and the context of how you’re thinking about the value of Ivy Hill at least currently.

Sure. And then maybe just returning to expectations for the dividend. So, essentially you invested 50 million this quarter, so that should be a non-income earning asset essentially for maybe what four quarters before that could potentially be evaluated for any income to ARCC?

No, I mean, it’s an equity investment to support them ramping in each here. So, I mean, the way that works is once the structured cells starts paying cash flows, it’s just typically a quarter out, there can be some income associated with a bit of maximizes income once the portfolio is fully built and leveraged. And we do have the ability to reduce that investment overtime. We always have the ability to increase investments in Ivy Hill. But it shouldn’t take too long for that tax and income associated with it.

Okay. And then maybe Kipp and Mitch, so you did reference this solid amount of net realized gains, because quarter end. Maybe you could update us on how you were thinking about this form of income going forward, whether investor should expect these gains fully withheld maybe on the balance sheet for book value growth net excise tax or more or like we in the form of a special dividend?

And I think many years ago we paid some special dividends and not sure we view those as efficient, they tend to roll toward short-term shareholders and particularly where we sit today, I think our goal at least for now, our expectations for now is that we’d retain it and obviously add the book value and we hope deeper metric accountings earnings. That’s my thought today.

Okay. And then, Penni, do you expect any of the $0.08 per share in expenses from the ACAS acquisition to linger in the second quarter or maybe even third?

Yes. That’s a good question I think from a forward-looking perspective. We did in the income statement breakout separately all of the cost related to the American Capital acquisition. So, you could see what we think is specific to finishing the acquisition at closing and also just onboarding the transaction. It was obviously a lot higher in Q1, because we had certain cost related to closing the deals specifically. So, we also have additional overhead cost for onboarding the transaction that we incur that the bulk of that’s going to come in Q1 because that’s when the integration activity with the most substantial. So, that $26 million if you take out the one-time cost will come down and I think we’re probably looking more at I would estimate probably around $3 million for Q2. And then that will remain a decline.

We think it’s less than a penny or less a quarter on an ongoing.

Yes. And it will roll off overtime, just like it did with the Allied acquisition. Anything that’s core expenses back to John’s point, we show in our other G&A line, so those are the things that would be more recurring ongoing operating cost. Anything that’s more specific kind of one-time or not recurring overtime, we have separated out for you. So, you have a view on how to run that off.

Great. That’s very helpful. And then lastly from me to Kipp. Of the $3 billion of investible capital that you identified. What is your expectation or maybe what is in the pipeline of mix for aged end deals versus club deals, given now your larger platform and scale?

I mean, one of the ways that we protect ourselves is we really try to age and lead all of our deals. And it’s 90% plus and a 95% of what we do. I think there is a lot of pretty low quality underwriting going on. We pass on deals because of that we also pass, because we don’t like financing $35 million EBITDA companies with no covenants which before doing this and we don’t like the structural elements of a lot of other people’s documentation. So, again I mean I think the good news is we got a pretty robust pipeline. It was not only slow, but I think reasonably unattractive in terms of new investing in Q1. The slow part happens, but the frothy market is clearly there. I feel a little better about backlog and pipelines for Q2 and it’s in line with our expectations with what we want to see on new deals. And the key element of that again is leading our own deals.

Great. That’s it from me, thanks guys.

Thanks.

[Operator Instructions] Our next question will come from Robert Dodd of Raymond James. Please go ahead.

Hi, guys. Just going back to the SSLP and the repayment like in that vehicle. If I remember like last quarter you indicated maybe the subsets could stock and paid back as early as late Q2. Now it’s Q3, that’s if I remember in that line. And certainly looks like the repayments in that vehicle were below the run rate that we’d seen through ’16. So, has the earnings been changed in there in terms of repayment velocity, given how fluffy the market is I would have expected maybe that velocity would have increased rather than slowing down. So, is there anything that’s going on with those the remaining assets in that vehicle?

Yes, I’m glad you asked. When Terry asked for them, that question I said a $1 billion a quarter. That would repay the entire program. So, I’m thinking about that thing, that’s not the right number. Right. We’re saying that actually all of the senior notes will be repaid by toward the end of Q2, which then allows for principle to repay to our sub carts. So, we start seeing repayments on ours in Q3 just to be clear. So, a $1 billion a quarter is too high a number based on what I referenced earlier. To answer your question directly, Robert, there’s no change in terms of what’s going on in that portfolio other than what I’ve said in the past, remains true. Which is the longer a borrower is stuck in a program, that can actively help do add on acquisitions, do refinancing etcetera. The more frustrated that borrower gets being in a dormant program. So, we’ve seen a more accelerated pace of repayments, we’ve been happy about that. I think Q1 was an anomaly with slower than we expected repayments. But you’re right, refinancing environment is attractive should lead to this continued accelerated repayment. The market allows for us, the borrowers want it, we want it, so it’s sort of the everybody win scenario that to ramp this thing down pretty quickly.

Perfect, I appreciate that. One follow-up if I can. On the dividend income that you received, obviously is that the bulk of the non-Ivy Hill came from community education centers, which was an Ivy’s asset not an ACAS asset. But as far as I can recall, had not being paying dividends before. Is that an asset that you do expect to be able to pay some level of the curving dividend or was that a one-time payment in Q1?

Yes. We elected to take the dividend. We’ve actually, we’ve announced that we the company that we had to go and restructure and own, with a couple of other lenders weaken as we actually sold it. And it represents some of the realized gain that you see in the financials through the end of April.

Okay, got it. Thank you.

Thanks.

Our next question will come from Dough Mewhirter of SunTrust. Please go ahead.

Hi, good afternoon. I just had one last question or remaining question. In your pipeline, could you talk about the health of the I guess the senior large bank loan syndicated market which you’ve been sort of in and out of and definitely more active in the recent. Are there any I guess be in the large sized deals which could support fee income out there?

There is nothing that jumps out that quick like deal, right, so to speak. We obviously saw that refinancing early this year. The deal that we did a year ago at LIBOR 800 plus get refinanced and LIBOR 350. So, it says a lot about what the big bank market will allow for these days. And like the CLO inflows and the loan frontend inflows were making much separate for us to compete in those big under rights. I don’t have anything that I can point to you or we can point to today. But again, they tend to be more complicated, less traditional deals that just don’t work with the regulatory and credit frameworks of the banks. I think the longer terms point here is well we may not have one in the backlog and pipeline. We think that opportunity is just going to continue to exist into the foreseeable future for certain deals. But they’re lumpy. But to answer the question directly, I think the answer is "No."

Okay, thanks. That's all my question.

Sure, thanks.

Our next question will come from Christopher Testa with National Securities Corp. please go ahead.

Hi, good afternoon. Thanks for taking my questions. I was just curious out of the remaining ACAS items to be sold off. What do you think is on the block first, I mean, it seems like CLO equity prices are obviously very strong and maybe there is some liquidity there to be able to sell. I was just curious how you're looking at the book and trying to be the order in which you're kind of selling those now.

Yes. I mean, it's a desperate portfolio that I think again we'll be selling in time. It does have a reasonable earnings, even though to Jonathan's point. We do them as long-term borrowable earnings. We're an active manager of investments and other folks fill out here daily. We got an outstanding viewing that day-to-day. So, we're taking advice from them as to what to sell, when to sell, we got some control positions, we got some non-control positions in deals. So, I think we're evaluating them on a single main basis instead of on a portfolio basis because we have the research and investing capability here to do that. So, have I answered the question?

Yes. So, in other words, you probably prioritize selling things that our past three investment period and not just looking at the broader market.

Exactly. I mean, there are whole host to considerations as to why certain CLO investment can be more attractive than another one. I think we're pretty good at identifying that here.

Got it. And I know last quarter you guys were granted exempt of relief from the SEC. just wondering if you began to do co-investments with other Ares funds and how the size of the funds that we should expect ARCC to be co-investing with?

Yes. The only account that we've really done any co-investing with the ARCCs since the exempt of order have been some middle market oriented bank loan accounts that we've raised from a handful of investors and the target there was just to raise capital to make us a better platform and frankly help ARCC.

Right.

Business testing has been positive. But that's really about it. We haven’t done and we don’t intend to for instance co-invest with our private equity funds or co-invest with our distress funds. I don’t think the co-investment will really full see. I don’t think you'll see any change in strategy from ARCC as a result of the co-investment release.

Got it. Thank you, that's all from me.

Thanks.

Our next question will come from Scott Scher of LMJ Capital. Please go ahead.

Yes, two quick questions. In February you increased the buyback by $200 million. I'm just curious what your mindset is on that today?

Hi Scott, how are you. I remember we suspended the buyback as we were pursuing a closing system. It was just for them and just wanted to have a buyback in place because we think it's a great tool to use. We see value in the stock and we think we can buy back stock accretively. The larger buyback programs really just represented the fact that we are a larger company today, and we wanted to have more flexibility because the stocks in this space have been pretty volatile. Really nothing, those are the reasons.

Okay. And then one follow-up. The $0.14 of earnings accretion that would come from a 100 basis point increase in LIBOR. Is that on the portfolio today, is that on the portfolio as you see it repositioned within two or three quarters. So, you have this $3 billion of assets that you said you're going to reposition over the next 12 to 24 months, lower yielding into higher yielding. I'm curious the $0.14 of earnings accretion, is that existing portfolio pro forma portfolio, how are you thinking about that?

That's a 100 basis point rise on the 331 portfolio and has nothing to do with any income that we can earn from repositioning lower yielding assets at the company. So, what we're trying to do just be clear of everybody on the plan for the year. It's reposition in the asset yields and we think that that adds meaningful incremental earnings as I mentioned before to the company. But the asset sensitivity point I think is key too, Scott, whereas if we do see rises in rates from here, we see earnings lift as well.

Yes. That's my last. Yes, thank you.

Thanks.

Our next question is a follow-up from Jonathan Bock of Wells Fargo. Please go ahead.

Let me in the queue one last time. Kipp, you outlined the potential for spread or excuse me earnings expansion as it relates to the $1.1 billion or $3 billion I guess around 6.7% or 6.9%. That's part of the story. Outline to us your view of the potential spread compression that exist in your portfolio today and the potential negative impact there. Largely because looking at your sales and repayments and particularly where the markets are today, I'd imagine that we could see a heavy earnings headwind as it relates to spread compression in your existing book absent ACAS?

Yes. I mean, to be honest, over the last, we have done a lot of refinancing in the portfolio in the last couple of years. So, it's not like we're sitting around with a whole host of wonderful 14% nice deal that we did in 2012. So, I think that the existing portfolio is of reasonable mix and it's not like getting called the way now that everybody can issue at 7% instead of 9%, we're just not seeing that. So, again with the backlog and pipeline of a $1 billion plus with average assets in the 9th, I feel pretty confident that at some of our higher yielding investments come off that we can replace them.

So, got it. And then just that $1 billion of pipeline that you have. You mentioned your separately managed accounts etcetera, are there does that billion in pipeline origination that your team originates. Is that effectively shared amongst all of available Ares private debt participants or is that ARCC specifically?

Yes. I mean, when our platforms originating, it's originating for the benefit of all of our accounts. So, remember those that that's kind of private account business, generally is taking a different set of assets. It's money that we've raised the target, the L450, L500 name that just doesn't fit so well for us at ARCC because of the leverage restriction at one-to-one and the company as well as our investors goals are achieving ROEs, they require higher yielding assets. But it does, that pipeline looks too it's already available vehicles pursuing to our allocation policy.

Okay, great. Thank you, for taking my two follow-ups.

Thanks, Jonathan.

Showing no further questions. This will conclude our question and answer session. I would like to turn the conference back over to Kipp deVeer for any closing remarks.

Yes. We thank everybody for joining. We've had some disappointment around earnings, but just so everybody hears from us. We're pretty excited about where the company's positioned for the year if we were clear in the prepared remarks and in the Q&A. and I think we're on a pass year that may take a little time but we feel great about. So, I just want to leave everybody with a couple of those thoughts and I hope you have a great afternoon.

The conference is now concluded. Thank you for attending today's presentation.