Standard&Poor's Ratings Services' ratings on New York City–based Ares Capital Corp. (NASDAQ: ARCC) reflect the company's improved market position, which is characterized by a $3.8 billion on-balance-sheet investment portfolio and $5.1 billion in off-balance-sheet assets under management (AUM) as of June 30, 2010. The company's strong capital levels and good funding sources also support the rating. Negatives for the rating include the increase in nonaccruing loans due to weaker-quality assets purchased in the Allied Capital (Allied) acquisition, declining interest coverage metrics owing to $735 million additional debt assumed from Allied, and its higher-risk portfolio, with an increasing proportion of mezzanine investments (subordinated debt investments). With the acquisition of Allied Capital on April 1, 2010, Ares increased the investments
