7. DEBT

Debt represents the (a) credit facility of the Company, (b) term note of AHI, (c) promissory notes issued in connection with an acquisition, (d) loan obligations of the consolidated CLOs and (e) credit facilities of the consolidated non-CLOs. The Company has elected to measure the loan obligations of the consolidated CLOs at fair value and reflect the credit facilities of the Company and consolidated non-CLOs at cost.

Credit Facility of the Company

During the period for the three months ended March 31, 2014 and 2013, there were no changes to the Company's credit facility. As of March 31, 2014 and December 31, 2013, the Company had $151.3 million and $121.3 million, respectively, outstanding under its credit facility that are presented as debt obligations on the Combined and Consolidated Statement of Financial Condition. For the three months ended March 31, 2014 and 2013, accrued interest of $0.2 million and $0.4 million, respectively, are included in interest expense in the Combined and Consolidated Statements of Operations.

Term Note of AHI

On December 18, 2012, AHI borrowed $55.0 million under a term note with a financial institution. Interest is paid quarterly and accrues based on the Company's option of LIBOR plus 1.75% or Prime Rate plus 0.75% with a floor of 1.50% per annum. Principal is payable in seven consecutive quarterly installments with increasing principal payments, commencing on January 15, 2013 and continuing up to and including June 15, 2014. The Company paid off this term note on March 20, 2014; therefore, no balance was outstanding as of March 31, 2014. As of December 31, 2013, principal outstanding under this term note was $11.0 million. The term note is secured by account balances on deposit with the same financial institution. AHI remained in compliance with all provisions of the term note from inception to repayment. In connection with this note, for the three months ended March 31, 2014 and 2013, the Company recorded interest expense of $0.1 million and $1.6 million, respectively, in the Combined and Consolidated Statements of Operations.

Promissory Notes of the Company

On July 1, 2013, in connection with the AREA acquisition, the Company entered into two promissory notes of $13.7 million and $7.2 million, with two former AREA partners. The maturity date of the notes is July 1, 2016. Beginning on July 1, 2014, the notes will be repaid in three equal consecutive principal payments of $4.6 million and $2.4 million, respectively. Interest will be accrued at a per annum rate equal to LIBOR plus 4.00%. As of March 31, 2014, the Company had $20.9 million outstanding under the two notes, presented as debt obligations in the Combined and Consolidated Statements of Financial Condition. For the three months ended March 31, 2014, accrued interest of $0.1 million is included in interest expense in the Combined and Consolidated Statements of Operations.

Loan Obligations of the Consolidated CLOs

Loan obligations of the Consolidated Funds that are CLOs ("Consolidated CLOs") represent amounts due to holders of debt securities issued by the Consolidated CLOs. Several of the Consolidated CLOs issued preferred shares representing the subordinated interests that are mandatorily redeemable upon the maturity dates of the senior secured loan obligations. As a result, these shares have been classified as liabilities and are included in CLO loan obligations in the Combined and Consolidated Statements of Financial Condition.

As of March 31, 2014 and December 31, 2013, the following borrowings were outstanding and classified as liabilities:

	As of March 31, 2014

	Borrowing Outstanding		Market Value		Weighted Average Remaining Maturity In Years
Senior secured notes(1)	$	10,556,804	$	10,239,074		8.81
Subordinated notes / preferred shares(2)		1,367,796		917,275		7.70

Total loan obligations of Consolidated CLOs		11,924,600		11,156,349

Type of Facility	Total Facility (Capacity)		Outstanding Loan		Market Value

Revolvers of Consolidated CLOs
Revolving credit line	$	48,949	$	48,949	$	48,184	0.42	%	0.17	%	04/16/21
Revolving credit line		1,035		—		—	0.51	%	0.19	%	02/24/18
Revolving credit line		13,808		13,808		13,728	0.51	%	0.18	%	03/12/18
Revolving credit line		48,510		48,510		47,553	0.44	%	0.17	%	10/11/21
Revolving credit line		10,043		10,042		10,043	0.52	%	0.14	%	01/26/20

Total revolvers of Consolidated CLOs				121,309		119,508

Total notes payable and credit facilities of Consolidated CLOs			$	12,045,909	$	11,275,857

(1): Weighted average interest rate of 2.35%.
(2): The subordinated notes do not have contractual interest rates, but instead receive distributions from the excess cash flows generated by each Consolidated CLO.

	As of December 31, 2013

	Borrowing Outstanding		Market Value		Weighted Average Remaining Maturity In Years
Senior secured notes(1)	$	10,967,524	$	10,679,878		8.92
Subordinated notes / preferred shares(2)		1,325,446		962,098		8.64

Total loan obligations of Consolidated CLOs		12,292,970		11,641,976

Type of Facility	Total Facility (Capacity)		Outstanding Loan		Market Value

Revolvers of Consolidated CLOs
Revolving credit line	$	48,949	$	48,949	$	48,119	0.43	%	0.17	%	04/16/21
Revolving credit line		1,035		1,035		1,034	0.51	%	0.19	%	02/24/18
Revolving credit line		23,567		23,567		23,351	0.52	%	0.18	%	03/12/18
Revolving credit line		48,510		48,510		46,812	0.45	%	0.17	%	10/11/21
Revolving credit line		12,865		12,865		12,865	0.52	%	0.14	%	01/26/20

Total revolvers of Consolidated CLOs				134,926		132,181

Total notes payable and credit facilities of Consolidated CLOs			$	12,427,896	$	11,774,157

(1): Weighted average interest rate of 2.36%.
(2): The subordinated notes do not have contractual interest rates, but instead receive distributions from the excess cash flows generated by each Consolidated CLO.

Loan obligations of the Consolidated CLOs are collateralized by the assets held by the Consolidated CLOs, consisting of cash and cash equivalents, corporate loans, corporate bonds and other securities. The assets of one Consolidated CLO may not be used to satisfy the liabilities of another Consolidated CLO. Loan obligations of the Consolidated CLOs include floating rate notes, deferrable floating rate notes, revolving lines of credit, and subordinated notes. Amounts borrowed under the notes are repaid based on available cash flows subject to priority of payments under each Consolidated CLO's governing documents. The Company has elected to apply the fair value option to all of the loan obligations of the Consolidated CLOs, with the exception of the loan obligation of Ares Enhanced Investment Strategy II, Ltd., which is carried at cost.

Credit Facilities of the Consolidated Non-CLOs

Certain consolidated non-CLOs maintain credit facilities to fund investments between capital drawdowns. These facilities generally are collateralized by the unfunded capital commitments of the Consolidated Funds' limited partners, bear an annual commitment fee based on unfunded commitments and contain various affirmative and negative covenants and reporting obligations, including restrictions on additional indebtedness, liens, margin stock, affiliate transactions, dividends and distributions, release of capital commitments, and portfolio asset dispositions. The obligations of these entities have no recourse to the Company. As of March 31, 2014 and December 31, 2013, the Consolidated Funds were in compliance with all financial and non-financial covenants under such credit facilities.

Credit Facilities of the Consolidated Funds

The Consolidated Funds had the following revolving bank credit facilities and term loans outstanding as of March 31, 2014:

Type of Facility	Total Facility (Capacity)		Outstanding Loan(1)(3)		Effective Rate	Commitment Fee

Short-term borrowings of Consolidated Funds
Credit facility	$	40,000	$	—	LIBOR + 1.75%	0.25%	06/06/14
Credit facility		100,000		—	LIBOR + 2.00%	0.75%	06/30/14
Credit facility		35,000		35,000	LIBOR + 0.50%	0.50%	07/19/14
Term loan payable		1,805,000		987,078	(2)	0.50%	07/19/14

Total short-term borrowings of Consolidated Funds				1,022,078

Long-term borrowings of Consolidated Funds
Credit facility	£	100,182		167,014	LIBOR + 1.85%	N/A	01/15/16
Credit facility	$	523,400		523,400	LIBOR + 2.20%	N/A	10/15/15
Notes payable		46,733		16,644	1.93%	N/A	09/19/15
Notes payable		114,048		40,601	1.93%	N/A	09/19/15

Total long-term borrowings of Consolidated Funds				747,659

Total borrowings of Consolidated Funds			$	1,769,737

(1): The market values of the long term notes approximate the current carrying value that is tied to the LIBOR rate.
(2): Rate depends on the tranche of each note held. The rates during the period ranged from One Month LIBOR +0.35% to Three Month LIBOR +0.90%.
(3): For loan maintained in a foreign currency, outstanding loan balances are converted and reported into U.S. dollars at the spot rate at reporting date.

The Consolidated Funds had the following revolving bank credit facilities and term loans outstanding as of December 31, 2013:

Type of Facility	Total Facility (Capacity)		Outstanding Loan(1)(3)		Effective Rate	Commitment Fee

Short-term borrowings of Consolidated Funds
Credit facility	$	40,000	$	—	LIBOR + 1.75%	0.25%	06/06/14
Credit facility		116,841		—	LIBOR + 2.00%	0.38%	06/13/14
Credit facility		100,000		—	LIBOR + 2.00%	0.75%	06/30/14
Credit facility		35,000		35,000	LIBOR + 0.50%	0.50%	07/19/14
Term loan payable		1,805,000		1,137,526	(2)	0.50%	07/19/14

Total short-term borrowings of Consolidated Funds				1,172,526

Long-term borrowings of Consolidated Funds
Credit facility	£	186,290		308,477	LIBOR + 1.85%	N/A	01/15/16
Credit facility	$	532,350		532,350	LIBOR + 2.20%	N/A	10/15/15
Credit facility	€	200,000		—	LIBOR + 3.00%	0.38%	08/16/19
Notes payable	$	46,733		16,644	1.93%	N/A	09/19/15
Notes payable		114,048		40,601	1.93%	N/A	09/19/15

Total long-term borrowings of Consolidated Funds				898,072

Total borrowings of Consolidated Funds			$	2,070,598

(1): The market values of the long term notes approximate the current carrying value that is tied to the LIBOR rate.
(2): Rate depends on the tranche of each note held. The rates during the period ranged from One Month LIBOR +0.35% to Three Month LIBOR +0.90%.
(3): For loan maintained in a foreign currency, outstanding loan balances are converted and reported into U.S. dollars at the spot rate at reporting date.

Loan Obligations of the Consolidated Mezzanine Debt Funds

Loan obligations of consolidated mezzanine debt funds represent amounts due to holders of debt securities issued by Ares Institutional Loan Fund B.V. (the "AILF Master Fund"), a Netherlands limited liability company. The AILF Master Fund issued Class A, Class B and Class C participating notes that have equal rights and privileges, except with respect to management fees and the performance fee that are applicable to only the Class A participating notes. These participating notes are redeemable debt instruments that do not have a stated interest rate or fixed maturity date. The AILF Master Fund may cause any holders to redeem all or any portion of such notes at any time upon at least five days prior written notice for any reason or no reason. A participating note holder may withdraw all or some of its notes as of the last business day of each calendar month by providing at least 30 days prior written notice. The holders of these participating notes have the right to receive the AILF Master Fund's first gains and the obligation to absorb the AILF Master Fund's first losses. As of March 31, 2014 and December 31, 2013, outstanding loan obligations of the consolidated mezzanine debt funds were $327.9 million and $323.2 million, respectively and are presented as mezzanine debt in the Combined and Consolidated Statements of Financial Condition. The residual interests of the consolidated mezzanine debt funds are carried at cost plus accrued interest. The mezzanine funds are collateralized by all of the assets of the AILF Master Fund with no recourse to the Company.