Good morning and welcome to the Ares Capital Corporation Earnings Conference Call. At this time all participants are in a listen-only mode. As a reminder, this conference is being recorded on Thursday May 7, 2009. Comments made during the course of this conference call and webcast and the accompanying documents contains 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, anticipate, believes, expects, intends, will, should, may and similar expressions. The company's actual results could differ materially from those expressed in the 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 the past performance or market information is not a guarantee of future results. During this conference call, the company may discuss core earnings per share which is a non-GAAP financial measure as defined by the SEC regulation G core earnings per share is the net per share increase or decrease in stockholders' equity resulting from operations less realized and unrealized gains and losses, any incentives, management fees attributed to such realized gains and losses and any income taxes related to such realized gains. A reconciliation of the core earnings per share to the net per share increased, decreased and stockholders' equity resulting from operations, the most directly comparable GAAP financial measure can be found in the company's earnings press release. The company believes that the core earnings per share 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. At this time we would like to invite participants to access the accompanied slide presentation by going to the company's website at www.arescapitalcorp.com and clicking on the May 7, 2009 presentation link under homepage of the investor resources section of the website. Ares Capital Corporation earnings release and annual report are also available on the company's website. I will now turn the call over to Mr. Michael Arougheti, Ares Capital Corporation's President.

Great. Thank you operator. And good morning everyone and thanks for joining us as always. I'm joined today by Bennett Rosenthal our Chairman; Rick Davis our CFO; Carl Drake; and Scott Lem from our financing and accounting team and Eric Beckman, Kipp deVeer, Mitch Goldstein and Mike Smith, senior members of our investment advisors management team. I hope you had a chance to review our two press releases this morning and our investor presentation posted on our website. As we have on past calls I'd like to start by giving you a brief overview of the market which should serve as a good backdrop from an update on our strategic priorities, our dividend strategy and our results. Although, capital markets and macroeconomic conditions remain challenging and difficult to predict, we have recently seen some improvement in terms of investors sentiments and liquidity, which has positively impacted secondary pricing in the credit markets. Improvement in the functioning of the capital markets, some encouraging macroeconomic data, better than expected earnings and the continued actions of the federal reserve and U.S. Treasury to stimulate financial markets have helped enhance investor confidence. Accordingly, the credit markets have rebounded from the lows seen at the end of the fourth quarter. These factors have also driven a fairly significant tightening in credit spreads since their peak in the fourth quarter, and a pick up in high-grade and high yield bond issuance. Specifically, in the leverage loan market, we witnessed a turn around in various technical factors that has driven a rebound in secondary loan pricing thus far in 2009 following the worst year on record in 2008. On the supply side, force (ph) loan portfolio sales have slowed and new issue volume remains soft. On the demand side investor fund flows turned strongly positive and loan…

Great thanks Mike. Please turn to the summary slide in our presentation which is slide three. Our basic and diluted core EPS and net investment income were all $0.31 for the first quarter, a $0.02 decrease versus last quarter and a $0.04 decline from the same period last year. This decline was due to lower structuring fee income which contributed just a penny this quarter compared to $0.03 last quarter and $0.04 in the period a year ago. Adding a net realized gains of $0.25 our core EPS plus net realized gains were $0.56 for the first quarter, well ahead of the $0.35 that we've reported on this metric both last quarter and a quarter a year ago. As Mike stated our strong net realized gains of $0.25 for the quarter driven by the CLO debt repurchases, more than offset net unrealized losses of $0.20 per share. Net result was $0.36 on a GAAP basis. This was also a significant improvement compared to the fourth quarter's loss of a $1.14 per share and our first quarter earnings of $0.12 a year ago. Consequently with the payment of our $0.42 dividend in the first quarter, our net asset value was down slightly to 11.20 versus 11.27 at the end of the year. You can see our net commitments declined in the quarter with 37.8 million in gross new commitments offset by a reduction of a 103.9 million in existing commitments. From a funding stand point, our gross and net spendings were 84.8 million and 5.5 million respectively. We continued to experience a relatively healthy level of exits in repayments, totaling just under 80 million of which 36.5 million were asset sales to our Ivy Hill funds with the remaining 42.7 million due to portfolio, amortization, prepayments, revolver pay downs or syndication…

Great. Thanks Rick. Now a few words about our recent investment activity and then I'll touch on our portfolio performance before concluding. As Rick, mentioned earlier in the first quarter we closed 37.8 million in new commitments across six companies, which consisted of five to existing portfolio companies and one to a new company. The two most significant new commitments were both to existing companies and included 25 million in senior and subordinated debt to a full profit post secondary education provider in Puerto Rico and $7.8 million in senior subordinated debt for a developer and manufacture of high visibility reflective products. Our other activities during the quarter consisted of fundings under existing commitments and opportunistic purchases of debt in existing portfolio companies in the secondary market. I'd like to highlight the attractiveness of purchasing debt at sizable discounts in performing companies we know well. We believe, this is an excellent way to deploy capital since it provides an attractive current return and it is a way to increase our net asset value overtime as such loans mature or as the market appetite improves for such strong performing companies. Slide 10 outlines our new investment activity. Of our new commitments 15% were in senior first lien debt with 84% in senior subordinated debt and 1% in equity securities. The vast majority of the new commitments were fixed rate with only 15% of such commitments in floating rate assets. And from a repayment standpoint 57% were in first lien, 10% in second lien with 33% in senior subordinated debt. Now if you turn to slide 11 for updated portfolio quality statistics. As the data reflects we continue to execute on our strategy of investing in larger companies at higher net investment spreads. We have accomplished this by bringing our average portfolio…

Thank you. (Operator Instructions). Our first question will come from Vernon Plack from BB&T Capital Markets. Please go ahead. Vernon Plack - BB&T Capital Markets: Thanks very much. Mike could you tell us what -- where that new facility is comprised?

Sure Rick. Do you want to walk through the pricing on the new facility?

Yeah. The new facility is -- the terms here we have now is it will be priced at L+ 400. Vernon Plack - BB&T Capital Markets: Okay.

And the rollover of the existing facility is LIBOR 350. Vernon Plack - BB&T Capital Markets: Okay great. And Mike from your comments regarding repositioning the portfolio, I assume that we should not expect a lot of portfolio growth any time, also given what your leverage ratio is. Are you -- I guess the thought is just to continue to reposition and it's all about current size correct?

Yes or no. As I mentioned in our prepared remarks around the dividend discussion we do have a fair amount of liquidity what I would call trivet (ph) on our balance sheet based on the mark-to-market adjustments and we now have access to a pretty sizeable amount of new capital through the Wachovia transactions. Vernon Plack - BB&T Capital Markets: Yup.

I would say differently we will continue to watch the market and when we believe that the market has stabilized and reached a level of normalcy, I think you will see us start growing the balance sheet again. Until we have confidence that the worst news is behind us and the economy is moving in the right direction, I think you are right you will see a pretty consistent level of the balance sheet. Vernon Plack - BB&T Capital Markets: Great thanks very much.

Sure.

Thank you. Our next question will come from Jim Shanahan from Wachovia. Please go ahead.

Just had a couple of quick ones, thanks for taking my call. The exited investments quarter to date -- the 22.6 million, are there any gains or losses that we should expect to see associated with those exit investments?

No there is not, it was pretty much at par.

Par value. So, and then with regards to the, that includes the sales of loans to the Ivy Hill funds as well?

Correct.

Now, and -- in one of the disclosures I was reading that there were loans sold to one of the Ivy Hill funds that actually resulted in a fairly sizeable realized loss to Ares investors, just likely to be one or 1.5 million dollars. I'm wondering what cause is that? Is that a mark-to-market from the prior of the most previous fair value mark?

Yeah. So those assets were sold at ARCC's marked value. But were sold at a discount to ARCC cost. And when we sell it at a discounted value to cost, obviously we have to realize a loss.

Oh, I see. So they were -- but they were sold at the most at -- whatever the most recent

Yes correct.

Their value. Okay. That's interesting. And then the dividend, question about that. We were somewhat surprised that the dividend wasn't cut last quarter in fact, but now you know we've got a run rate of operating income in the low $0.30 range. Why not just have cut it to more like $0.30 and given that you can likely shield some income here from distribution just due to the weakness in operating income and some of those -- the losses that you have taken?

Yeah. This is I'm not quiet sure that there is every a right answer Jim and we've tried to have a very open and honest dialogue with the market about how we think about our dividend as it relates to our liquidity and our operating strategy. The reality out is if you look at the core earnings capability of the business as we talked about we have five or six levers that we can pull particularly with new capital to grow our core earnings from where they sit today in the first quarter. And just to reiterate what those are, investing some of our new capital to drive increased spread and fee income, its continues to rotate our portfolio, its reprising our existing assets and taking advantage of incremental spread and fee for repricing, its harvesting capital gains, its repurchasing our debt. So, when you look at the gap between the Q1 earnings and the amount of capital that's on our balance sheet available for investment, you have to have the view that we can continue to grow the core earnings and we've been pretty consistent in terms of laying out that strategy at least over the last 12 to 18 months. If you look at where we sit today and again this has been consistent prior quarters, we are trying to manage to a level of stability in what is a very volatile market and in a market that is very difficult to predict the direction of. As we sit here today through the first quarter between core earnings per share in the first and the second quarter, plus gains realized to date in rollover income, we're trying to manage our run-rate profitability against our dividend levels and again we're going to keep taking it quarter-by-quarter and see what the market offers us to see how our core is developing.

Thank you. And one more I'm sure there are other questions. I was curious if you could comment Mike, what you are seeing in the marketplace here with the significant spread, tightening in leveraged loan markets and more obvious performance you had during the call in the equity markets. Do you, how do you feel about unrealized depreciation in the quarter and the potential additive impact of that to your capital?

Yeah I think its going to be a progression over time. If we all think back to how the original FAS 157 worked its way through the credit markets in the PDC sector and in particular, it was really a 12 month process of developing consensus around what 157 meant for a ill-liquid sub-originated assets like the ones that we hold. And I would expect a similar type of progression on the way back up, but its not going to be immediate. I think we can expect that FAS 157 will obviously help the credit markets in general particularly as it relates the assets held on bank balance sheets and mortgage and other real estate related securities and as the credit markets kill themselves and asset values move up, I think the reference securities -- although we've always argued they're not particularly relevant to our assets. Those reference securities should improve and as they do I'd expect to see a continued increase in asset values across the sector. But I do think its going to be a slow process, but a beneficial one.

Okay. Thanks very much.

Sure.

Thank you, our next question will come from Matthew Howlett from Fox-Pitt Kelton. Please go ahead.

Hi guys thanks for taking my question. You got strong credit quality in the quarter. Looks like its holding up great, I just wanted to know if you could elaborate on the five existing portfolio companies at what you contributed subordinated capital. Is that offensive or defensive we haven't got a chance to look through what companies that were about. But can you maybe elaborate me on that?

Yeah I -- most of those situations are what I would call offensive. They were particularly within the existing portfolio, companies that were making acquisitions, that required new capital in order to do so. And as I mentioned in our prepared remarks around repricings, what's nice about those situation is we get to put more capital behind winners in our portfolio where we sit on the board and have real good visibility to company performance. But more importantly along with the new capital typically comes a repricing opportunity with the existing capital. So you may see a situation where we have an existing senior secured loan to a company that's looking to make an acquisition and by making a mezzanine investment in that company and for some of the acquisition we can actually reprice our senior -- existing senior loan to market. So there's a double benefit there. A: Matthew Howlett:} Okay got you. And then switching to the CLO debt repurchases, I think you're up to about 15 million this year. How much more would you like to go, how much is available and how do you weight that versus really locked in long term funding that's Libor plus 38 or something?

Yeah again you have to find the right balance, as Rick mentioned in his comments, were we to have adopted FAS 159 based on the market price of the similar assets today, our long term debt is worth up to $175 million of a $170 million of incremental NAV. I think we are trying to strike the right balance. Clearly we view the ability to repurchase our CLO debt as a deep discount to be one of the best uses of our capital today. And we'll continue to do it, I think we are going to try to focus on some of the more junior trenches in those vehicles where we unlock the deepest discount without necessarily giving up to your point the benefit of the long term capital. So we'll strike a balance. In terms of how much is available I think we've publicly disclosed how large that facility is. Technically there's $314 million of notes under pinning that CLO. The challenge that you have and this is pretty widely distributed and takes a fairly longtime to execute on. So it's something that we're very focused on but can't really give anybody a sense for how it will take or it will be successful buying more A: Matthew Howlett:} Okay. Good, and then the last question just on the long term credit picture I mean the portfolio companies the EBITDA looked really strong couple of big quarter-over-quarter. If you look over the next two years if the EBITDA just stayed flat, it didn't go up on the portfolio of the companies due you feel comfortable that your underlying portfolio of companies not -- could not only maintain our interest coverage but they could de-lever. And I guess of -- just to follow on that I mean is that, it looks like the market just particularly where the market pricing on the CLO investment is looks as AAAs on the mid-20's. Are they what's the difference between -- why is the market -- why is the notes trading at such a discount that they are expecting some cumulative loss rate and it looks like in sort of the mid-40s, related to?

Let me answer the second question first, I can't answer specifically your first question but I'll try to give you a general sense for how we think about underwriting credit. The reason that the CLO notes both for our company and others like us trade where is a function of the two things that are really not related to an understanding a fundamental credit. The first is its long dated paper at very low spreads to put it in perspective our existing AAAs are priced at LIBOR 25 with no LIBOR floor and 12 years left on maturity. So for any investor today given the relative value opportunities in the market clearly if you try to present value that back is what the key driver. The second large driver is the holders of these securities are levered themselves and have been cross investing and lot of CMBS and RMBS paper. And tend to be fore sellers if they deal with their own de-leveraging. And if those two combinations, both technical that really drive pricing in the CLO market generally in for these notes in particular. I don't believe that there is really any fundamental look through where people are expressing a view on the fundamental credit. With regard to your first question you should know one of the reasons we like to be up in the balance sheet or the capital structure and to be a lead agent is because we get to control the documentation of our own transaction and put covenant packages in place that stepped down over time and force a company to de-leverage otherwise they have to come talk to us, about a potential restructuring or repricing. Typically when you underwrite a facility in the middle market be it senior or subordinated, you underwrite it to…

Sure.

Thank you. Our next question will come from Andrew Wessel from J.P. Morgan. Please go ahead.

Yeah, good afternoon, thanks for taking my question. It's just a quick one, just on the new line, the amortization period that's for your amortization period. Is that a straight line amortization so one-third maybe on an annual basis?

No. Its not. It's really -- the way to think about it is it amortizes as loans pay off. So for example if there is a $20 million loan that's pledged to that facility, to the extent that that loan pays off, we will pay down the line. The only scheduled maturity prior to the third anniversary is if that natural amortization does not reduce the facility by $25 million in the first year and the second year, then we would reduce the facility. So its really not a scheduled amort so much as a static pool where we've turn it out against that pool of assets.

Got you. So as well as the loans performed as expected you are more or less term financed.

Correct.

Okay. Great thanks a lot I appreciate it.

Sure.

Thank you, our next question will come from Greg Mason from Stifel Nicolaus. Please go ahead. Greg Mason - Stifel Nicolaus & Co: Hi. Good morning. Could you discuss as the credit markets have improved a little bit, what are the new types of returns that you are seeing both from an income perspective and fee perspective for new investments today?

Sure. Why don't we talk about it in terms of the primary markets and the secondary markets because there has been a fairly large discrepancy between the return opportunities in those markets at points in time and everything that I'm about to say is obviously qualified by the fact that the new issue market is fairly inactive right now. So, a lot of the pricing is being discussed in the market is really a reflection of where a certain people are willing to transact business, but not necessarily a reflection of where deals are getting done. I'd say in general the senior debt market is roughly a two times debt to EBITDA market, maybe 2.5 times and the pricing that one could get on those assets will range from 8 to 10% with a 2 to 3% fee. The mezzanine market is roughly a four times market and the total return opportunity there is 18 to 20% and that comes through a combination of coupons, fees and call protection and in some instances warrants. Again fees are anywhere from 2 to 3%, spreads are typically 13 to 15% predominantly cash with real call protection and covenants, and the call protection periods we're seeing are typically anywhere from one to three years of hard call protection and then prepayment penalties after the no call period of anywhere from half of the coupon scaling down or 105 scaling down. So if you add up the fee you get on the front end, the pre-payment penalty you get on the back-end plus the spread that will get you to that 18 to 20% range. Greg Mason - Stifel Nicolaus & Co: Okay and you talked about under expanding your assets under management assuming contracts. Can you talk about what are the opportunities out there? For assuming contracts and what do the economics look like?

Sure, just to remind everybody on the call, Ares management is one of the largest bank loan managers in the country. We have a very significant capital markets and asset management infrastructure resident both here as well as in London and Los Angeles. What's happening in the market is, as I think if you think about mass (ph) question around the CLO financing, a lot of the CLO's as they are currently structured have two fee components, one being a senior management fee and the second being a subordinated management fee that is performance related. Because of the way that these facilities tend to be structured, default rates increase and there is negative ratings migration, the subordinated fees tend to get shut off which significantly reduces the capital available to support an asset management infrastructure. Given the amount of CLOs and other levered loan funds that have been raised or had been raised prior to December 2007 there are a number of what I would call subscale asset managers with significant infrastructure that's unable to be supported by just the senior management fees, and they can't grow. So the types of transactions that you should expect to see in this market are going to be either taking over those management contracts as a sub-advisor, buying those management contracts for cash, buying assets out of those facilities et cetera et cetera. The reason that it's so attractive for us is given that we already have the infrastructure and the capabilities in place rolling those funds onto our platform is obviously highly accretive. Greg Mason - Stifel Nicolaus & Co: And final question to follow up on Matt's commentary about repurchasing debt, what's the effective yield of the $8.2 million of debt that you repurchased? How does that compare to say the yields you just gave us on new investments?

Yeah, I don't have the spreadsheets in front of me and we can follow up offline to help you through the calculation, but order of magnitude its going to comparable. My recollection is it's a 15 to 20% return. Greg Mason - Stifel Nicolaus & Co: Great, thank you guys.

Sure.

Thank you, our next question will come from Faye Elliott from the Bank of America Merrill Lynch. Please go ahead.

Hi, thanks for taking my question.

Sure.

Most has been answered just wanted to ask if in your release you say that the facilities have been expanded or you have been nearly 200 million revolving facility subject to leverage restrictions which I guess are pretty obvious in other conditions. Are the other conditions minimum NAV numbers that we should be aware of, did they want any liens assigned is there anything?

Yeah. They are going to be secured facilities similar to our existing facility Wachovia where we are hedging specific assets through an SPB structure against those loan facilities.

Okay.

In terms of the covenants, the covenants are going to look a lot like the covenants that exist in our current facility particularly referencing the assets coverage and minimum network test.

Okay. And do you foresee any issues assigning those liens and that we've seen under different circumstances, trouble with some other BECs assigning those liens is this is the matter of working it out and..?

No. They're -- again, they're in SPBs.

Okay.

It's the same lender. So with the existing turn out facility we are really just changing the maturity in the term structure and the new facility will obviously be investing new assets but there is really no prior lien on those assets.

Okay, but there will be a liens assigned once.

Yes. To the new facility to the extent we use the new facility to acquire.

Okay. Great thank you.

Sure.

Thank you. Our next question will come from Nick Capuano from Imperial Capital. Please go ahead.

Hey guys. Congratulation on the financing in the quarter.

Thank you very much.

Just one quick follow up on the buybacks. Just what are the prospects for you to do more buybacks of the CLO in terms of how much do you think you can source and is this something that we should be seeing material amount moreover the next few quarters.

Yeah. As we just said that, our hope is that we'll able to execute more than we can't guarantee it. It's a core strategic priority of ours, among many. But we do believe that that's an extraordinary use of our capital. It's a pretty lengthy process to source and execute on this. But it's something that we'll continue to spent time on.

And the magnitudes of the exists and funding, I know you already addressed the fact that you are given for now you plan to keeping the portfolio relatively steady. But if I don't know you're exits bounced around quite a bit lower this last quarter. Do you have any or can you provide any insight now just on the magnitudes of the exits you think you are going to have coming up over the next quarter or two?

We can't provide any visibility on that. What I will say is I have actually been pleasantly surprised by the level of repayments in the portfolio over the last three quarters given the M&A environment and the economic environment.

Sure.

But while they're obviously less than we would like them to be. We think that they are significantly higher than similar portfolio are experiencing. We are continuing to look for ways to get liquidity in the portfolio. There is going to be natural amortization, there is going to be refinancings in some of our better performing assets and again where we can opportunistically sell assets to redeploy into this market we will do that as well but this is all step that we're looking at on a daily and weekly basis to evaluate.

All right great job, thanks. Operator: (Operator Instructions). Mr. Arougheti at this time, I show there are no further questions. Please continue your presentation.

Great, thank you operator. We have no further prepared remarks but we again want to thank every body for joining our call this morning. And again a very heartfelt thanks to the investment team for all their hard work over the last quarters. And we thank every body for their continued support and look forward to speaking with you on our next quarterly call. Thank you.

Thank you this does conclude today's Ares Capital Corporation's earnings conference call. Thank you for your participation. You may now disconnect.