Ares, Varagon Form New Partnership for Senior Loans
JUN 19, 2015 - 6:50 am
Ares Capital and Varagon Capital Partners announced that they are establishing a new joint venture that will make senior secured loans to middle-market companies. The new joint venture will be called the Senior Direct Lending Program (SDLP). The SDLP will work to follow on with the success that Ares Capital enjoyed with its previous senior loan joint venture, the Senior Secured Loan Program (SSLP), with GE Capital.
Ares Capital is a business development company that is externally managed by a subsidiary of Ares Management, whose Direct Lending Group had approximately $29 billion in assets under management as of March 31, 2015. Varagon was formed in 2013 as a lending platform by American International Group and other partners.
The SDLP will underwrite and hold first lien loans, including stretch senior and unitranche loans, that are originated by Ares and Varagon. The program will provide sponsors and management teams with continued access to flexible capital with speed and certainty and without syndication requirements. It is expected that the SDLP will commit and hold individual loans of up to $300 million. Ares Capital may also co-invest with the SDLP to accommodate larger transactions.
“We see a significant and growing opportunity to support strong middle-market companies and deliver high-quality assets to our investors. Varagon offers long-term investors exposure to attractive, directly-originated middle-market loans with best-in-class risk management. Ares Capital is a clear market leader with deep origination relationships and a strong investment track record,” said Walter Owens, chief executive officer of Varagon. “We have built a great relationship with the team at Ares Capital and are excited to formalize our already-strong ties with this strategic partnership.”
“We are excited to partner with Varagon in this new venture. SDLP should continue to help us maintain our market-leading position as a provider of senior secured loans to middle-market companies,” said Kipp deVeer, chief executive officer of Ares Capital. “Driven by our strong origination and risk management capabilities, Ares Capital has been one of the most active direct lending participants in the middle-market for more than 10 years. The SSLP has committed more than $19 billion in senior secured loans over the past five years, and we expect to continue our demonstrated presence in this market segment in the years ahead with Varagon through the SDLP.
“As a long-term investor, AIG is attracted to the strong investment fundamentals of middle-market credit. Varagon’s new relationship with Ares Capital and our partnership with Varagon will provide AIG with direct access to the best middle-market lending opportunities,” said Brian T. Schreiber, executive vice president and chief strategy officer, AIG, and a member of Varagon’s board of directors. “We believe our partners’ deep experience in middle-market lending and a strong alignment of interests will drive meaningful long-term value to AIG.”
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