Good morning, and welcome to Ares Capital Corporation's Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded on Tuesday, May 8, 2012. 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 the 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 the forward-looking statements for any reason, including those listed in the 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 realized and unrealized gains and losses, any incentive management fees attributable to such realized and unrealized gains and losses, and any income taxes related to such realized gains. 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 on the company's website at arescapitalcorp.com. 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 relating 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 to this information. At this time, we would like to invite participants to access the accompanying slide presentation by going to the company's website at www.arescapitalcorp.com, and clicking on the Q1 '12 Earnings Presentation link on the homepage of the Investor Resources section of the website. Ares Capital Corporation's earnings release and Form 10-Q are also available on the company's website. This morning, Ares Capital Corporation issued its first quarter earnings press release and posted a supplemental earnings presentation on its website. The company will refer to this presentation later in the call. I will now turn the conference over to Mr. Michael Arougheti, Ares Capital Corporation's President. Go ahead, please.

Great. Thank you, operator. Good morning to everyone, and thanks for joining us. We're pleased to report first quarter core earnings per share of $0.38, a level that is 23% higher than the $0.31 per share that we reported for the same period a year ago. On a net income basis, we reported first quarter GAAP earnings per share of $0.49, which included net realized and unrealized gains of $0.13 per share, driving a modest 1% sequential increase in our NAV to $15.47 per share. This morning, we also announced that we upsized, lowered the pricing and extended the maturity on our revolving credit facility. Specifically, we increased commitments under this facility from $810 million to $900 million and lowered the spread over LIBOR in the facility by 75 basis points from LIBOR plus 300, to LIBOR plus 225. The amended facility has a 4-year maturity of May 2016, which includes a 3-year revolving period that ends in May 2015. Including this upsize, we now have $1.6 billion in total commitments across our 3 revolving credit facilities at a blended cost of LIBOR plus 2.3%, with no floor, and we have no debt maturities until 2016. Pro forma for the upsized revolving credit facility, our available undrawn capacity on these lines, is over $1 billion as of the end of the first quarter, subject to borrowing base and leverage restrictions, which we believe positions us well to take advantage of market opportunities as they arise. This availability of lower cost debt capital will enable us to reduce our blended funding costs as we draw on the revolvers to make new investments over time. As most of you know, we also issued $163 million in 4 7/8% senior unsecured convertible notes in early March. This latest convert carries the same 17.5%…

Yes, Mike, thanks. For those viewing the earnings presentation posted on our website, please turn to Slide 3, which summarizes our financial and portfolio performance information. Our basic and diluted core earnings were $0.38 per share for the first quarter of 2012, a $0.09 per share decline over our core EPS of $0.47 per share for the fourth quarter of 2011, but a $0.07 per share increase from the same quarter a year ago. I will provide more detail on our core earnings a little later. Our net investment income per share for the first quarter decreased to $0.36 per share compared to $0.45 per share in the fourth quarter of 2011, but increased compared to $0.24 per share in the first quarter of 2011. Our GAAP net income for the first quarter was $0.49 per share compared to $0.58 per share for the fourth quarter of 2011, and compared to $0.61 per share for the first quarter of 2011. As we have discussed in the past, our net investment income and GAAP net income per share are reduced by an increase in the GAAP accrual for capital gains incentive fees in any quarter when our portfolio experiences net gains, as long as our cumulative realized and unrealized gains continue to exceed our cumulative realized and unrealized losses. In the first quarter, both measures were reduced by an increase in this accrual of $0.02 per share, in line with the $0.02 per share in the fourth quarter and $0.07 per share a year ago. No amounts are due under the investment advisory agreement with our investment adviser, since only realized gains and not unrealized gains are measured against both realized and unrealized losses when determining the actual capital gains portion of the incentive fee that is payable. At March 31,…

Great. Thanks, Penni. Now I'd like to discuss our recent investment activity, update you on our portfolio and highlight our post-quarter end investments and backlog and pipeline before concluding and turning over to Q&A. If folks would turn to Slide 13. In the first quarter, we made 12 commitments, totaling approximately $384 million. 6 to new portfolio companies, 1 to an existing portfolio company and commitments to 5 additional companies made through the Senior Secured Loan Program, which included 3 to existing companies and 2 to new companies. Our first quarter investment activity reflected slower market conditions, and our ongoing strategy to remain even more highly selective during tighter and more volatile markets. On Slide 14, our first quarter investment activity by asset class illustrates that we invested 82% in first lien debt and 17% in the Senior Secured Loan Program, the proceeds of which were applied to co-investments with GE in stretch senior and unitranche loans. From an exit standpoint, about 91% of our exits were also in first lien senior debt, with a small portion of subordinated debt leaving the portfolio. Now turning to Slide 15. On a combined basis, the underlying portfolio company weighted average total net leverage remained steady at 4.3x quarter-over-quarter. Our overall weighted average interest coverage declined slightly from 2.6x to 2.5x. At the end of the first quarter, the underlying borrowers within the Senior Secured Loan Program had similar metrics, with a weighted average total net leverage multiple of 4.4x and weighted average total interest coverage ratio of 3x. On Slide 16, you can see that we made investments in companies averaging $28 million in weighted average EBITDA during the first quarter. As we've previously discussed, when the larger liquid capital markets are frothy, we tend to focus on slightly smaller companies where…

[Operator Instructions] Our first question is from Jasper Burch of Macquarie.

Just starting off with, I noticed that your cash balance both this quarter and March 31 last year, has been a little bit high. I was just wondering is that just white noise in terms of the timing of fundings or is there something else going on?

White noise, I don't know if I'd characterize it that way, but I think you shouldn't read into that.

Okay, that's useful. And then looking at the yield on new investments, your 9.3% is a little bit low. Just -- is that what we should sort of expect going forward? And could you speak a little bit to the possibility of sort of adding structural leverage to those and increasing the yield that way?

Yes, I think you hit the nail on the head with the second part of your question. As we've seen in past quarters, it's difficult to read into the headline number on new investments because as you know, through the course of the quarter, either through distribution and syndication or structuring, we tend to see that number come up, and I'd expect to see the same in this quarter as well once all is said and done.

Our next question is from Joel Houck of Wells Fargo.

I guess, really kind of a big picture question here in regards to what we're seeing in the credit markets, particularly in the middle market, spreads are compressing. I guess they are still more attractive than say the institutional high-yield market. What's your view as the year plays out in terms of originating new credits versus kind of defending your existing portfolio or making existing portfolio investments, presumably you know those credits very well. And to the extent you are deploying capital, which you, obviously, did this quarter, where are you seeing the most kind of attractive types of deals? Obviously, there's senior, but are there certain types of industries or themes that you're gravitating towards?

Sure. Let me just address the defending the existing portfolio because as we've said before, one of the benefits of being of our size and breadth is that we have investments, between ARCC and Ivy Hill, in over 500 middle market companies. And as you mentioned, those are companies that we know very well. We've been tracking for a long time. And so the best originations and the most efficient originations, obviously, come from the existing portfolio. Again, when you have EBITDA growth like we've been talking about consistently in the double digits, you also have a natural deleveraging within that portfolio. So while you could think of it as defending the portfolio, I think maintaining and releveraging the portfolio, given its performance, is a great way for us to deploy capital in this environment. And those borrowers just given our incumbency, tend to be much less price sensitive. So that's clearly a theme and as you saw this quarter with the 12 new investments, close to half of them come from the existing portfolio, and I'd expect to see that continue. In terms of how we see the year playing out, we talked about this last call as well. The markets are experiencing significant week-to-week and month-to-month volatility, and I think you have to have a view directionally where you think the market is going over the course of the year and really drive the portfolio composition and the origination to that view. If you look at 2011 as an example, we saw similar inflows into the market in the first quarter and the early parts of the second quarter. We saw spreads similarly tighten to the point where on single B credit, we saw yield to maturity of about 5.5%, 5.6% and by the time we got to…

All right. That's excellent color. And one more, if I may, in terms of your kind of current outlook on structuring fees would be helpful. Obviously the SSLP facility has -- there's a capacity issue coming at some point in time. So how should we think about structuring fees in light of that capacity constraint in your future?

Yes, well, let's address fees generally and then we can talk about SSLP specifically. So fees are, obviously, lumpy based on investment activities. We talked about in our prepared remarks. I think it's important that as we're growing the portfolio, people understand that the core earnings being generated from recurring spread income is also growing in line with the growth in the portfolio. And I think you asked this question last quarter, Joe, and we talked about it vis-à-vis setting the dividend relative to ordinary course origination activity. So the fees are going to be up and they're going to be down, but if you look at the history of the company over the last 8.5 years, the average level of fees per share has been about $0.05 per share per quarter. And some quarters you'll see it above that. Some quarters like last quarter, you'll see it meaningfully above that. And so when we manage the dividend and we manage the business, we understand that fees are in the ordinary course, part of it. But obviously, the volatility of the fee income is something we factor in when we're setting our dividend. With regard to SSLP, I'm not sure that SSLP is capacity constrained. Number one, similar to the existing portfolio, there's a natural deleveraging within that portfolio that allows us to reinvest capital as it comes back. There's a natural velocity within that portfolio, too, that frees up capacity. And as you've seen over the last 3 years, there's been a consistent growth in the program to meet the market demand. I think we've expanded the size of the program 3 or 4x between the acquisition in the fourth quarter of '09 through to today. And so I'm not quite sure it's capacity constrained, but what you do highlight is true that dollars invested into SSLP carry a marginally higher fee based on the assets booked relative to investments made on balance sheet.

Yes, I guess that's where I was going is more, not that it's technically constrained today, as more of kind of your outlook going forward. But the overall commentary on fee income is very helpful.

[Operator Instructions] And our next question is from Greg Mason of Stifel, Nicolaus. Greg Mason - Stifel, Nicolaus & Co., Inc., Research Division: Mike, could you comment a little bit on the prepayments that you saw in the second quarter with a 13.1% yield on those debt investments? Were these exits planned from the old Allied portfolio? I know that had high yields, or is this just the repayment activity that just generally occurred?

Yes, I would say it's just natural prepayment penalties. Greg Mason - Stifel, Nicolaus & Co., Inc., Research Division: Okay. And then can you talk...

By the way, just to clarify, too. The 13.1% versus the 9% is post-Q1, not within Q1. Greg Mason - Stifel, Nicolaus & Co., Inc., Research Division: Great. And then could you also clarify, is that 13.1% only on the 75% of the debt investments and the 25% nonyielding would lower that number on a weighted average yield for the x?

If you actually -- It's a good -- I'm glad you mentioned it. If you actually look at the actual interest income because of the amount of nonyielding in equity securities, it's effectively flat. Greg Mason - Stifel, Nicolaus & Co., Inc., Research Division: Okay, great.

On a dollar basis. Greg Mason - Stifel, Nicolaus & Co., Inc., Research Division: And then could you talk about, with the launching of the new Ares commercial mortgage. Does this take away from your time or senior management's time from Ares, is there any negative ramifications to ARCC?

None whatsoever. Just for everybody's benefit, what Greg is referring to is Ares management recently supported the successful IPO of a commercial mortgage REIT called Ares Commercial Real Estate. I'm the Chairman of the Board, which takes up very little of my time. That business is building on some of the themes that I referenced in our prepared remarks just in terms of the opportunity for nonbank lenders to take meaningful market share in a whole host of middle market asset classes, real estate being one of them. I would actually say the opposite. I think that as the platform grows and as we have more capital markets touch points and more investment professionals around the country, trafficking in local markets, I think it's a net benefit to ARCC and to the BDC just based on the information flow and the deal flow that we'd expect to see coming off of that platform. Greg Mason - Stifel, Nicolaus & Co., Inc., Research Division: Great. And then one last question. On the venture finance team that you recently hired, how quickly do you think you can ramp that particular team's originations up and how meaningful can that business be to your origination given it's a entirely new sector for you?

Sure. So the team that we acquired used to work at a fund called BlueCrest. Some of those -- of you on the phone may be familiar with them because they had filed an N-2 to go public as a BDC. And again, as I mentioned in the prepared remarks, I think it's obvious to many that capital formation in specialty finance is difficult, and if you're fortunate enough to actually get public, growing and scaling a public company successfully is equally as challenging. And so I think the fact that the team came over, and this is a team of about a dozen investment professionals with decades of experience, I think is a testament to the strength of the platform in terms of our ability to support the team and the growth in that business. Given the fact that they were operating up until the point that they joined us and given the depth of experience in relationships that they have, we expect them to ramp pretty quickly. That said, the business itself just based on the size of the investments and the velocity in those investments, our expectation would be that it's probably a $250 million to $500 million portfolio over time. I think they can get there pretty quickly, but these are pretty fast amortizing loans. Beyond $500 million, I don't want to say we won't be able to grow it there, but I think it's tough to sustain that level of fundings for this kind of business.

Showing no further questions, this will conclude the question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

Great. We had nothing further. I'd just like to reiterate our thanks and gratitude for everybody's attention today and continued support, and we look forward to speaking to everybody again next quarter.

Ladies and gentlemen, this concludes our conference call for today. If you missed any part of today's call, an archived replay of this conference call will be available approximately 1 hour after the end of this call through May 21, 2012 to domestic callers by dialing (877) 344-7529 and to international callers by dialing 1 (412) 317-0088. For all replays, please reference account number 10012156. An archived replay will also be available on a webcast link located on the homepage of the Investor Resources section of our website.