...If Libor [the London interbank offered rate] rises by half a percentage point this year, that could add eight cents to earnings. Ares has a Libor-sensitive balance sheet. The company’s net debt-to-equity ratio of 0.61 allows it to increase its leverage and grow its portfolio. It has $600 million in excess borrowing capacity. I have an earnings estimate of $1.61 a share for this year, compared with the consensus estimate of $1.57. The stock trades for 9.8 times earnings. Tangible book value is $16.49 a share. The stock is selling for 96% of tangible book, with dividend coverage of 124%. Return on equity is about 10.2%. If interest rates move up a little, ROE could return to 12%, where it stood in 2012....

...Some 91% of the portfolio is floating-rate, and the rest is fixed-rate. But their funding is 82% fixed and 18% floating. They have locked in the rates on the liability side but can benefit from an uptick in interest rates. Ares borrows from a consortium of 27 banks. It pays a commitment fee of 0.375% per year on any unused portion of the revolving credit facility. The average maturity of its loans is 4.2 years, and the loan-to-value ratio is about 54%. Of the loans, 41% are first-lien senior secured, and 35% are second-lien senior secured. It isn’t trading down in credit quality to get more yield.