Apollo, Ares vehicles seek $260m via share offerings

The listed business development companies of two major private equity firms plan to use the proceeds for investments and debt repayments.

Apollo Investment Corporation and Ares Capital Corporation, two publicly traded business development corporations in the US, are going to the public markets after an extended liquidity drought to raise money for new investments and debt repayments.

Apollo Investment, a NASDAQ-listed affiliate of Apollo Global Management, is attempting to raise $157.5 million through a public offering of 18 million shares at $8.75 per share. Underwriters of the deal have the ability to purchase up to an additional 2.7 million shares. The offering is expected to close Tuesday.

Ares Capital Corporation agreed to sell 11 million shares at a price of $9.25 per share, to raise about $101.8 million. Underwriters will be able to buy up to 1.7 million additional shares to cover over-allotments, and the proceeds will be used to pay debt and fund investments.

Both companies plan to use the proceeds of the public offerings to fund new investments, repay outstanding debt and for other general purposes.

Apollo Investment and Ares Capital reported profit increases in recent earnings filings, a vast difference from fellow business development corporations American Capital and Allied Capital.

American Capital has been negotiating with lenders to stave off bankruptcy and took a $547 million loss in the second quarter, while Allied Capital suffered a net $1 billion loss for all of 2008, driven in part by declines in its investment portfolio.

Ares reported net gains, realised and unrealised, from investment deals and foreign currency transactions in the second quarter were $2.8 million, compared to major losses of $32.8 million a year ago. Apollo Investment posted higher first quarter profits and said it earned a profit of 59 cents per share, as opposed to 55 cents a share in the same quarter in 2008.

Apollo’s portfolio is mostly focused on mid-market private companies. The firm occasionally invests in public companies but generally focuses mezzanine and senior secured loans to private companies.

Ares Capital, also listed on the NASDAQ, is an affiliate of alternative asset manager Ares Management. The firm invests in senior secured and mezzanine debt of companies, as well as equity.