SEC Company Response from ARES CAPITAL CORP (ARCC) (CIK 0001287750) (ARCC) — Sep 16, 2016
ARES CAPITAL CORP (ARCC) (CIK 0001287750)
Date: Sept. 16, 2016 · CIK: 0001287750 · Accession: 0001104659-16-145233
AI Filing Summary & Sentiment
File numbers found in text: 333-212604
Letter
www.proskauer.com VIA EDGAR United States Securities and Exchange Commission Division of Investment Management 100 F Street, N.E. Washington, D.C. 20549 Attention: John Ganley Re: Ares Capital Corporation Registration Statement on Form N-14 Filed July 20, 2016 (File No. 333-212604)
Dear Mr. Ganley:
In a telephone conversation on August 23, 2016, you provided us with verbal comments on the registration statement on Form N-14 (the “Registration Statement”) filed by Ares Capital Corporation (the “Fund”) on July 20, 2016. We have revised the Registration Statement to respond to the comments you provided during the telephone conversation and today filed Amendment No. 1 (“Amendment No. 1”) to the Registration Statement. We are concurrently filing this letter via EDGAR as a correspondence filing.
Set forth below are the comments of the staff of the Securities and Exchange Commission (the “Staff”) verbally provided by you and immediately below each comment is the response with respect thereto and, where applicable, the first location in the relevant filing of the requested disclosure. Comments described with respect to one section (and the responses thereto) are applicable to other sections of the Registration Statement that contain similar disclosure. Capitalized terms used but not defined herein shall have the meanings set forth in the Registration Statement.
Letter to Ares Capital Stockholders
1. Increase the font size of the letter to at least 10 point font.
The Fund has made the requested revision.
2. In the first paragraph of the letter, simplify the description of the Transactions to remove the technical steps and focus on the end result of the Transactions.
The Fund has made the requested revision on the first page of the letter.
Beijing | Boca Raton | Boston | Chicago | Hong Kong | London | Los Angeles | New Orleans | New York | Newark | Paris | São Paulo | Washington, DC
U.S. Securities and Exchange Commission
September 16, 2016
Page 2
3. In the second paragraph of the letter, simplify the description of the merger consideration to be received; consider using a table or chart instead of a narrative. Include disclosure explaining what percent of the combined company that Ares Capital stockholders and American Capital stockholders will own following the completion of the Transactions.
The Fund has made the requested revisions on the first page of the letter.
4. In the sixth paragraph of the letter, simplify the disclosure by cross-referencing to disclosure in the proxy for certain of the detail.
The Fund has made the requested revision on the second page of the letter.
5. In the last paragraph of the letter, revise the language to more clearly guide Ares Capital stockholders to the relevant sections of the Registration Statement on which they should focus.
The Fund has made the requested revision on the second page of the letter.
Letter to American Capital Stockholders
6. Increase the font size of the letter to at least 10 point font.
The Fund has made the requested revision.
7. In the first paragraph of the letter, simplify the description of the Transactions to remove the technical steps and focus on the end result of the Transactions.
The Fund has made the requested revision on the first page of the letter.
8. In the second paragraph of the letter, simplify the description of the merger consideration to be received; consider using a table or chart instead of a narrative. Include disclosure explaining what percent of the combined company that Ares Capital stockholders and American Capital stockholders will own following the completion of the Transactions.
The Fund has made the requested revisions on the first page of the letter.
9. In the second bullet included in the fifth paragraph of the letter, include the phrase “golden parachute payments” to describe the compensation payments described and include the estimated aggregate dollar amount of such compensation.
The Fund has made the requested revision on the first page of the letter.
U.S. Securities and Exchange Commission
September 16, 2016
Page 3
10. In the fourth bullet included in the fifth paragraph of the letter, clarify that none of the directors proposed to be elected will continue as a director after completion of the Transactions.
The Fund has made the requested revision on the first page of the letter.
11. Add language to the letter clarifying that the merger is expected to be taxable to American Capital stockholders.
The Fund has made the requested revision on the first page of the letter.
12. In the last paragraph of the letter, revise the language to more clearly guide American Capital stockholders to the relevant sections of the Registration Statement on which they should focus.
The Fund has made the requested revision on the second page of the letter.
Table of Contents
13. Revise to make the table of contents more readable; consider eliminating all upper case as a style in the table of contents.
The Fund has made the requested revision in the table of contents.
14. Consider adding a glossary to help readers with certain defined terms given the size of the Registration Statement.
The Fund has made the requested revision on page 1.
15. Move the “Comparative Fees and Expenses” section after the “Summary” section and before the “Risk Factors” section.
The Fund has made the requested revision.
Questions and Answers
16. Page 4 – General – To the extent applicable, consider condensing disclosure in the Q&A section. Add cross-references to existing disclosure elsewhere in the Registration Statement, where applicable, to minimize redundancy.
The Fund has made the requested revision in this section, where applicable.
U.S. Securities and Exchange Commission
September 16, 2016
Page 4
17. Page 4 – General –Consider splitting up the Q&A section into separate Q&A sections, one for Ares Capital stockholders and one for American Capital stockholders.
The Fund has addressed this comment by revising certain questions to provide separate answers targeted at Ares Capital stockholders or American Capital stockholders, as applicable.
18. Page 4 – “What will happen in the Transactions?” – Add a structure chart explaining the steps of the proposed mergers in your answer to this question. Include descriptions of the relationship of ACAM and IHAM to American Capital and Ares Capital when describing the ACAM/IHAM merger throughout the Registration Statement.
The Fund has made the requested revision on page 5.
19. Page 4 – “What will American Capital stockholders receive in the Transactions?” –
Replace the language in the first paragraph of this answer with a table or chart that describes the components of the merger consideration and simplify the disclosure regarding additional consideration to be received upon the declaration of certain dividends by providing examples with numbers.
The Fund has made the requested revisions on page 6.
In the second paragraph of this answer, add disclosure regarding the expected percentage ownership of Ares Capital stockholders and American Capital stockholders in the combined company following the completion of the Transactions.
The Fund has made the requested revisions on page 7.
Replace the language in the third and fourth paragraphs of this answer with a table or chart that shows the market value of the merger consideration and add information regarding the last reported net asset value of Ares Capital and American Capital for the same time periods presented.
The Fund made the requested revisions on page 8.
20. Page 6 – “What will happen to American Capital stock options and incentive awards at the effective time?” – Add disclosure quantifying the dollar value being paid to option holders based on appropriate assumptions.
The Fund has revised the disclosure on page 8 to provide the percentage of the total merger consideration that is estimated to be paid to holders of American Capital stock options.
U.S. Securities and Exchange Commission
September 16, 2016
Page 5
21. Page 6 – “Will I receive dividends after completion of the Transactions?” – Revise the disclosure regarding the history of the dividends and distributions paid by Ares Capital and American Capital to refer to the periods presented in the applicable disclosure on pages 335-336. Remove the second paragraph of this answer regarding the additional compensation receivable upon the declaration of certain dividends from this answer.
The Fund has made the requested revision on page 9.
22. Page 7 – “How does Ares Capital’s investment objective and strategy differ from American Capital?” – Replace the existing disclosure in the answer to this question with a side-by-side comparison of Ares Capital’s and American Capital’s investment objectives and strategies and highlight any key differences between the two.
The Fund has made the requested revision on page 11.
23. Page 7 – Add a new Q&A to follow “How does Ares Capital’s investment objective and strategy differ from American Capital?” that addresses, by way of a side-by-side comparison, the differences among Ares Capital’s, American Capital’s and, following completion of the Transactions, the combined company’s, total assets, total liabilities, net asset value, asset mix of investments, number of portfolio companies and industrial composition of portfolio.
The Fund has made the requested revision on page 12.
24. Page 8 – “How will the combined company be managed following the completion of the Transactions?” – Clarify in the answer to this question that the current directors and officers of American Capital will not be joining Ares Capital after the completion of the Transactions.
The Fund has made the requested revision on page 10.
25. Page 8 – “What is expected to happen to annual expenses following the completion of the Transactions?” – Include an estimated time frame in which the combined company expects to achieve cost savings and synergies in the answer to this question.
The Fund has made the requested revision on page 15.
26. Page 9 – “Is the merger expected to be taxable to American Capital stockholders?” – Clarify the total percentage of the merger consideration that is expected to be taxable and bifurcate the disclosure for U.S. stockholders and non-U.S. stockholders into separate paragraphs in the answer to this question.
The Fund has made the requested revision on page 18.
27. Page 10 – Add disclosure in the answer to “What if the Transactions are not completed?” regarding what will happen to the proceeds of the Mortgage Manager Sale if the Transactions are not completed.
The Fund has made the requested revision on page 19.
U.S. Securities and Exchange Commission
September 16, 2016
Page 6
28. Page 10 – “What Ares Capital stockholder vote is required to approve the issuance of the shares of Ares Capital common stock to be issued pursuant to the merger agreement (including, if applicable, at a price below its then current net asset value per share)?” – Revise the disclosure per comment 46 below. Condense and simplify the disclosure explaining the vote required to approve the proposal to issue Ares Capital common stock pursuant to the merger agreement.
The Fund has made the requested revision on page 20.
29. Pages 12 & 13 – “Did the board of directors of American Capital receive opinions from financial advisors regarding the merger consideration?” and “Did the board of directors of Ares Capital receive opinions from financial advisors regarding the merger consideration?” – Condense the answers to these questions; consider replacing certain disclosure with cross-references to existing disclosure elsewhere in the Registration Statement, where applicable.
The Fund has made the requested revision on page 22.
30. Page 17 – Include in the Questions and Answers section a summary of the disclosure on pages 450-451 with respect to base management fees, income based fees and capital gains incentive fees payable to Ares Capital’s external adviser. Include the graphical representation of the calculation of the income based fee in such disclosure.
The Fund has made the requested revision on page 15.
Summary
31. Page 19 – Add a structure chart explaining the steps of the proposed mergers under the heading “American Capital and Ares Capital Propose a Merger of Acquisition Sub into American Capital and a Merger of ACAM into IHAM.”
The Fund has made the requested revision on page 27.
32. Page 19 – Add a side-by-side comparison of Ares Capital and American Capital, including performance metrics, under the heading “The Parties to the Transactions.”
The Fund has made the requested revision on page 29.
U.S. Securities and Exchange Commission
September 16, 2016
Page 7
33. Page 21 – Add a table or chart describing the components of the merger consideration under the heading “In the Merger, American Capital Stockholders Will Have a Right to Receive 0.483 of a Share of Ares Capital Common Stock and Approximately $10.06 of Cash Consideration per Share of American Capital Common Stock.”
The Fund has made the requested revision on page 31.
34. Pages 21-22 – Add disclosure quantifying the dollar value being paid to option holders based on appropriate assumptions.
The Fund has made the requested revision on page 33.
35. Pages 22 & 284 – Clarify that the advisory vote on compensation includes “golden parachute” payments to be made in connection with the completion of the Transactions and disclose the aggregate amount of estimated compensation to be approved under such proposal under the heading “Annual Meeting of American Capital Common Stockholders” in the Summary and the section entitled “American Capital Proposal #2: Advisory (Non-Binding Vote on Compensation).”
The Fund has made the requested revisions on page 33.
36. Page 23 – Provide charts and/or tables to illustrate the implied value of the merger consideration based on the trading price of Ares Capital common stock as of the day before the public announcement of the entry into the merger agreement and as of a recent date, under the heading “Comparative Market Price of Securities.” Add information for the relevant most recently reported net asset value of such common stock as well.
The Fund has made the requested revisions on page 34.
37. Pages 25 & 141 – If accurate, add disclosure that the American Capital board of directors considered the historical performance of American Capital and its ability to make dividend payments in evaluating the Transactions.
The Fund
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CORRESP 1 filename1.htm Proskauer Rose LLP 2049 Century Park East, 32nd Floor Los Angeles, CA 90067-3206 September 16, 2016 Monica J. Shilling Member of the Firm d 310.284.4544 f 310.557.2193 mshilling@proskauer.com www.proskauer.com VIA EDGAR United States Securities and Exchange Commission Division of Investment Management 100 F Street, N.E. Washington, D.C. 20549 Attention: John Ganley Re: Ares Capital Corporation Registration Statement on Form N-14 Filed July 20, 2016 (File No. 333-212604) Dear Mr. Ganley: In a telephone conversation on August 23, 2016, you provided us with verbal comments on the registration statement on Form N-14 (the “Registration Statement”) filed by Ares Capital Corporation (the “Fund”) on July 20, 2016. We have revised the Registration Statement to respond to the comments you provided during the telephone conversation and today filed Amendment No. 1 (“Amendment No. 1”) to the Registration Statement. We are concurrently filing this letter via EDGAR as a correspondence filing. Set forth below are the comments of the staff of the Securities and Exchange Commission (the “Staff”) verbally provided by you and immediately below each comment is the response with respect thereto and, where applicable, the first location in the relevant filing of the requested disclosure. Comments described with respect to one section (and the responses thereto) are applicable to other sections of the Registration Statement that contain similar disclosure. Capitalized terms used but not defined herein shall have the meanings set forth in the Registration Statement. Letter to Ares Capital Stockholders 1. Increase the font size of the letter to at least 10 point font. The Fund has made the requested revision. 2. In the first paragraph of the letter, simplify the description of the Transactions to remove the technical steps and focus on the end result of the Transactions. The Fund has made the requested revision on the first page of the letter. Beijing | Boca Raton | Boston | Chicago | Hong Kong | London | Los Angeles | New Orleans | New York | Newark | Paris | São Paulo | Washington, DC U.S. Securities and Exchange Commission September 16, 2016 Page 2 3. In the second paragraph of the letter, simplify the description of the merger consideration to be received; consider using a table or chart instead of a narrative. Include disclosure explaining what percent of the combined company that Ares Capital stockholders and American Capital stockholders will own following the completion of the Transactions. The Fund has made the requested revisions on the first page of the letter. 4. In the sixth paragraph of the letter, simplify the disclosure by cross-referencing to disclosure in the proxy for certain of the detail. The Fund has made the requested revision on the second page of the letter. 5. In the last paragraph of the letter, revise the language to more clearly guide Ares Capital stockholders to the relevant sections of the Registration Statement on which they should focus. The Fund has made the requested revision on the second page of the letter. Letter to American Capital Stockholders 6. Increase the font size of the letter to at least 10 point font. The Fund has made the requested revision. 7. In the first paragraph of the letter, simplify the description of the Transactions to remove the technical steps and focus on the end result of the Transactions. The Fund has made the requested revision on the first page of the letter. 8. In the second paragraph of the letter, simplify the description of the merger consideration to be received; consider using a table or chart instead of a narrative. Include disclosure explaining what percent of the combined company that Ares Capital stockholders and American Capital stockholders will own following the completion of the Transactions. The Fund has made the requested revisions on the first page of the letter. 9. In the second bullet included in the fifth paragraph of the letter, include the phrase “golden parachute payments” to describe the compensation payments described and include the estimated aggregate dollar amount of such compensation. The Fund has made the requested revision on the first page of the letter. U.S. Securities and Exchange Commission September 16, 2016 Page 3 10. In the fourth bullet included in the fifth paragraph of the letter, clarify that none of the directors proposed to be elected will continue as a director after completion of the Transactions. The Fund has made the requested revision on the first page of the letter. 11. Add language to the letter clarifying that the merger is expected to be taxable to American Capital stockholders. The Fund has made the requested revision on the first page of the letter. 12. In the last paragraph of the letter, revise the language to more clearly guide American Capital stockholders to the relevant sections of the Registration Statement on which they should focus. The Fund has made the requested revision on the second page of the letter. Table of Contents 13. Revise to make the table of contents more readable; consider eliminating all upper case as a style in the table of contents. The Fund has made the requested revision in the table of contents. 14. Consider adding a glossary to help readers with certain defined terms given the size of the Registration Statement. The Fund has made the requested revision on page 1. 15. Move the “Comparative Fees and Expenses” section after the “Summary” section and before the “Risk Factors” section. The Fund has made the requested revision. Questions and Answers 16. Page 4 – General – To the extent applicable, consider condensing disclosure in the Q&A section. Add cross-references to existing disclosure elsewhere in the Registration Statement, where applicable, to minimize redundancy. The Fund has made the requested revision in this section, where applicable. U.S. Securities and Exchange Commission September 16, 2016 Page 4 17. Page 4 – General –Consider splitting up the Q&A section into separate Q&A sections, one for Ares Capital stockholders and one for American Capital stockholders. The Fund has addressed this comment by revising certain questions to provide separate answers targeted at Ares Capital stockholders or American Capital stockholders, as applicable. 18. Page 4 – “What will happen in the Transactions?” – Add a structure chart explaining the steps of the proposed mergers in your answer to this question. Include descriptions of the relationship of ACAM and IHAM to American Capital and Ares Capital when describing the ACAM/IHAM merger throughout the Registration Statement. The Fund has made the requested revision on page 5. 19. Page 4 – “What will American Capital stockholders receive in the Transactions?” – Replace the language in the first paragraph of this answer with a table or chart that describes the components of the merger consideration and simplify the disclosure regarding additional consideration to be received upon the declaration of certain dividends by providing examples with numbers. The Fund has made the requested revisions on page 6. In the second paragraph of this answer, add disclosure regarding the expected percentage ownership of Ares Capital stockholders and American Capital stockholders in the combined company following the completion of the Transactions. The Fund has made the requested revisions on page 7. Replace the language in the third and fourth paragraphs of this answer with a table or chart that shows the market value of the merger consideration and add information regarding the last reported net asset value of Ares Capital and American Capital for the same time periods presented. The Fund made the requested revisions on page 8. 20. Page 6 – “What will happen to American Capital stock options and incentive awards at the effective time?” – Add disclosure quantifying the dollar value being paid to option holders based on appropriate assumptions. The Fund has revised the disclosure on page 8 to provide the percentage of the total merger consideration that is estimated to be paid to holders of American Capital stock options. U.S. Securities and Exchange Commission September 16, 2016 Page 5 21. Page 6 – “Will I receive dividends after completion of the Transactions?” – Revise the disclosure regarding the history of the dividends and distributions paid by Ares Capital and American Capital to refer to the periods presented in the applicable disclosure on pages 335-336. Remove the second paragraph of this answer regarding the additional compensation receivable upon the declaration of certain dividends from this answer. The Fund has made the requested revision on page 9. 22. Page 7 – “How does Ares Capital’s investment objective and strategy differ from American Capital?” – Replace the existing disclosure in the answer to this question with a side-by-side comparison of Ares Capital’s and American Capital’s investment objectives and strategies and highlight any key differences between the two. The Fund has made the requested revision on page 11. 23. Page 7 – Add a new Q&A to follow “How does Ares Capital’s investment objective and strategy differ from American Capital?” that addresses, by way of a side-by-side comparison, the differences among Ares Capital’s, American Capital’s and, following completion of the Transactions, the combined company’s, total assets, total liabilities, net asset value, asset mix of investments, number of portfolio companies and industrial composition of portfolio. The Fund has made the requested revision on page 12. 24. Page 8 – “How will the combined company be managed following the completion of the Transactions?” – Clarify in the answer to this question that the current directors and officers of American Capital will not be joining Ares Capital after the completion of the Transactions. The Fund has made the requested revision on page 10. 25. Page 8 – “What is expected to happen to annual expenses following the completion of the Transactions?” – Include an estimated time frame in which the combined company expects to achieve cost savings and synergies in the answer to this question. The Fund has made the requested revision on page 15. 26. Page 9 – “Is the merger expected to be taxable to American Capital stockholders?” – Clarify the total percentage of the merger consideration that is expected to be taxable and bifurcate the disclosure for U.S. stockholders and non-U.S. stockholders into separate paragraphs in the answer to this question. The Fund has made the requested revision on page 18. 27. Page 10 – Add disclosure in the answer to “What if the Transactions are not completed?” regarding what will happen to the proceeds of the Mortgage Manager Sale if the Transactions are not completed. The Fund has made the requested revision on page 19. U.S. Securities and Exchange Commission September 16, 2016 Page 6 28. Page 10 – “What Ares Capital stockholder vote is required to approve the issuance of the shares of Ares Capital common stock to be issued pursuant to the merger agreement (including, if applicable, at a price below its then current net asset value per share)?” – Revise the disclosure per comment 46 below. Condense and simplify the disclosure explaining the vote required to approve the proposal to issue Ares Capital common stock pursuant to the merger agreement. The Fund has made the requested revision on page 20. 29. Pages 12 & 13 – “Did the board of directors of American Capital receive opinions from financial advisors regarding the merger consideration?” and “Did the board of directors of Ares Capital receive opinions from financial advisors regarding the merger consideration?” – Condense the answers to these questions; consider replacing certain disclosure with cross-references to existing disclosure elsewhere in the Registration Statement, where applicable. The Fund has made the requested revision on page 22. 30. Page 17 – Include in the Questions and Answers section a summary of the disclosure on pages 450-451 with respect to base management fees, income based fees and capital gains incentive fees payable to Ares Capital’s external adviser. Include the graphical representation of the calculation of the income based fee in such disclosure. The Fund has made the requested revision on page 15. Summary 31. Page 19 – Add a structure chart explaining the steps of the proposed mergers under the heading “American Capital and Ares Capital Propose a Merger of Acquisition Sub into American Capital and a Merger of ACAM into IHAM.” The Fund has made the requested revision on page 27. 32. Page 19 – Add a side-by-side comparison of Ares Capital and American Capital, including performance metrics, under the heading “The Parties to the Transactions.” The Fund has made the requested revision on page 29. U.S. Securities and Exchange Commission September 16, 2016 Page 7 33. Page 21 – Add a table or chart describing the components of the merger consideration under the heading “In the Merger, American Capital Stockholders Will Have a Right to Receive 0.483 of a Share of Ares Capital Common Stock and Approximately $10.06 of Cash Consideration per Share of American Capital Common Stock.” The Fund has made the requested revision on page 31. 34. Pages 21-22 – Add disclosure quantifying the dollar value being paid to option holders based on appropriate assumptions. The Fund has made the requested revision on page 33. 35. Pages 22 & 284 – Clarify that the advisory vote on compensation includes “golden parachute” payments to be made in connection with the completion of the Transactions and disclose the aggregate amount of estimated compensation to be approved under such proposal under the heading “Annual Meeting of American Capital Common Stockholders” in the Summary and the section entitled “American Capital Proposal #2: Advisory (Non-Binding Vote on Compensation).” The Fund has made the requested revisions on page 33. 36. Page 23 – Provide charts and/or tables to illustrate the implied value of the merger consideration based on the trading price of Ares Capital common stock as of the day before the public announcement of the entry into the merger agreement and as of a recent date, under the heading “Comparative Market Price of Securities.” Add information for the relevant most recently reported net asset value of such common stock as well. The Fund has made the requested revisions on page 34. 37. Pages 25 & 141 – If accurate, add disclosure that the American Capital board of directors considered the historical performance of American Capital and its ability to make dividend payments in evaluating the Transactions. The Fund