apollo investment corporation · 22/06/2017 · (1) source: national center for the middle market...
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Apollo Investment Corporation The JMP Securities Financial Services and Real Estate Conference June 22, 2017
Information is as of March 31,2017 except as otherwise noted. It should not be assumed that investments made in the future will be profitable or will equal the performance of investments in this document.
Disclaimers, Definitions, and Important Notes Forward-Looking Statements
We make forward-looking statements in this presentation and other filings we make with the Securities and Exchange Commission (“SEC”) within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives, including information about our ability to generate attractive returns while attempting to mitigate risk. When used in this release, the words “believe,” “expect,” “anticipate,” “estimate,” “plan,” “continue,” “intend,” “should,” “may” or similar expressions, are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: the return on equity; the yield on investments; the ability to borrow to finance assets; and other risks associated with changes in business conditions and the general economy.
The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described in the company's filings with the SEC. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation may contain statistics and other data that in some cases has been obtained from or compiled from information made available by third-party service providers.
Past Performance
Past performance is not indicative nor a guarantee of future returns, the realization of which is dependent on many factors, many of which are beyond the control of Apollo Global Management, LLC (“AGM”); Apollo Investment Management, L.P.; and Apollo Investment Corporation (collectively “Apollo”). There can be no assurances that future dividends will match or exceed historic ones, or that they will be made at all. Net returns give effect to all fees and expenses. Unless otherwise noted, information included herein is presented as of the date indicated on the cover page and may change at any time without notice. Apollo Investment Corporation (the “Corporation” or “AINV” or the “Fund”) is subject to certain significant risks relating to our business and investment objective. For more detailed information on risks relating to the Corporation, see the latest Form 10-K and subsequent quarterly reports filed on Form 10-Q.
Financial Data
Financial data used in this presentation for the periods shown is from the Corporation’s Form 10-K and Form 10-Q filings with the SEC during such periods. Unless otherwise indicated, the numbers shown herein are rounded and unaudited. Quarterly financial information about the Company refers to fiscal quarters.
AUM Definition
Assets Under Management (“AUM”) refers to the investments AGM manages or with respect to which it has control, including capital it has the right to call from its investors pursuant to their capital commitments to various funds. AGM’s AUM equals the sum of: (i) the fair value of its private equity investments plus the capital that it is entitled to call from its investors pursuant to the terms of their capital commitments plus non-recallable capital to the extent a fund is within the commitment period in which management fees are calculated based on total commitments to the fund; (ii) the net asset value of AGM’s capital markets funds, other than certain senior credit funds, which are structured as collateralized loan obligations or certain collateralized loan obligation and collateralized debt obligation credit funds that have a fee generating basis other than mark-to-market asset values, plus used or available leverage and/or capital commitments; (iii) the gross asset values or net asset values of AGM’s real estate entities and the structured portfolio vehicle investments included within the funds AGM manages, which includes the leverage used by such structured portfolio vehicles; (iv) the incremental value associated with the reinsurance investments of the portfolio company assets that AGM manages; and (v) the fair value of any other investments that AGM manages plus unused credit facilities, including capital commitments for investments that may require pre-qualification before investment plus any other capital commitments available for investment that are not otherwise included in the clauses above. AGM’s AUM measure includes AUM for which it charges either no or nominal fees. AGM’s definition of AUM is not based on any definition of AUM contained in its operating agreement or in any of its Apollo fund management agreements. AGM considers multiple factors for determining what should be included in its definition of AUM. Such factors include but are not limited to (1) its ability to influence the investment decisions for existing and available assets; (2) its ability to generate income from the underlying assets in its funds; and (3) the AUM measures that it uses internally or believes are used by other investment managers. Given the differences in the investment strategies and structures among other alternative investment managers, AGM’s calculation of AUM may differ from the calculations employed by other investment managers and, as a result, this measure may not be directly comparable to similar measures presented by other investment managers.
1
Agenda
Overview of Apollo Investment Corporation
Market Opportunity
Investment Strategy
Portfolio and Financial Review
Conclusion
Q&A
Appendices
2
3
Overview of Apollo Investment Corporation
Introduction to Apollo Investment Corporation (“AINV”)
4
(1) On a fair value basis. (2) As of March 31, 2017. (3) Apollo Investment Management, L.P. (4) See definition of AUM at beginning of presentation. (5) MidCap Financial refers to MidCap FinCo Limited, a private limited company domiciled in Ireland, and its subsidiaries, including MidCap Financial Services, LLC. MidCap Financial is managed by Apollo Capital Management, L.P., a subsidiary of Apollo Global Management, LLC, pursuant to an investment management agreement between Apollo Capital Management, L.P. and MidCap FinCo Designated Activity Company. (6) On March 29, 2016, the Company received an exemptive order from the SEC permitting greater flexibility to participate in co-investment transactions with certain of its affiliates where terms other than price and quantity are negotiated, subject to the conditions included therein.
Middle Market Lender
Competitive Advantages
Externally Managed by
Apollo Global Management
Apollo Affiliation Apollo affiliation provides
significant benefits Large and diverse direct
origination team with joint front engine across AINV & MidCap Financial (“MidCap”) (5)
Externally managed by an affiliate (3) of Apollo Global Management, LLC, a leading alternative asset manager with approximately $197 billion of AUM (2) (4) with expertise in private equity, credit and real estate
Apollo Global Management, LLC was founded in 1990
Publicly traded (NASDAQ: AINV) business development company (“BDC”) treated as a regulated investment company (“RIC”) for tax purposes
Primarily provides debt solutions to U.S. middle market companies with a focus on direct origination
Since IPO in April 2004 and through March 31, 2017, invested $17.0 billion in 398 portfolio companies
$2.32 billion portfolio across 86 companies (average portfolio company investment $26.9 million) and 25 different industries, spanning a broad range of asset types (1) (2)
Exemptive Relief to Co-Invest (6)
Expected to improve AINV’s competitive positioning Expected to increase deal flow
Flexible Mandate Generally able to invest in all
levels of the capital structure – flexible mandate Broad product offering Experienced management team
AINV Key Differentiators
5
Large and Diverse Direct Origination Team Broad Product Offering
Significant Scale
Active Investor
Strong External Manager
Co-investment Exemptive Relief
Commitment To Repurchase Stock
Founded: 1990
AUM: $197bn
Employees: 989
Inv. Professionals: 371
Global Offices: 16
6 (1) As of March 31, 2017. See definition of AUM at the beginning of the presentation. AUM components may not sum due to rounding. (2) Apollo’s core industry sectors include chemicals, natural resources, consumer and retail, distribution and transportation, financial and business services, manufacturing and industrial, media and cable and leisure, packaging and materials and the satellite and wireless industries.
Global Footprint
Credit $141bn AUM
Opportunistic buyouts Distressed buyouts and debt
investments Corporate carve-outs
Private Equity
$45bn AUM Drawdown Liquid / Performing Permanent Capital Vehicles:
-Athene -MidCap -BDCs -Closed-End Funds
Advisory
Real Estate $12bn AUM
Commercial real estate Global private equity and debt
investments Performing fixed income
(CMBS, CRE Loans)
Firm Profile(1)
Investment Approach
Value-oriented
Contrarian
Integrated investment platform
Opportunistic across market cycles and capital structures
Focus on nine core industries (2)
Business Segments
Toronto
Bethesda
Chicago
New York Bethesda Los Angeles
Houston
Chicago Toronto
Madrid
London Frankfurt Luxembourg
Mumbai
Delhi
Singapore
Hong Kong
Shanghai
Strong External Manager
7
Market Opportunity
Compelling Middle Market Opportunity
8
If the middle market were a stand-alone country, it would be the 3rd largest economy in the world (1)
Middle Market Businesses Require Capital to Support Growth (1) (2)
Significant need for refinancing of existing loans made to middle market companies;
Bulk of deals come due in 2020 and 2021 (3)
Significant un-invested private equity capital should translate into strong loan demand (4)
UnitedStates
China U.S. MiddleMarket
Japan Germany
40%
20%
16%
19% 5%
Capital Expenditure
Information Technology
Acquisitions
Human Resources
Other
There are nearly 200,000 U.S. middle market businesses that represent one-
third of private sector GDP, employing ~47.9 million people.
$553
$800
Dry Powder(Middle-market focused PE Firms)
Implied potential loan demand(assuming 40% capitalization rate)
$ in billions $ in billions
$10 $18
$24 $29
$36
$26
$11 $5
2017 2018 2019 2020 2021 2022 2023 2024
Middle Market Institutional Loan Maturities
(1) Source: National Center for the Middle Market 1Q 2017 Middle Market Indicator. (2) Chart represents capital investment allocation of U.S. middle market companies willing to invest. 64% expressed a desire to invest. (3) Middle market institutional estimated maturities. 2017 represents 2Q17-4Q17. Source: Thomson Reuters LPC. (4) Source: PitchBook US PE Middle Market Report 2017 1Q.
0
2,000
4,000
6,000
8,000
10,000
12,000
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Bank Regulation and Related Impact
Total Number of U.S. Banks Continues to Decline (1)
Leveraged Lending Guidance Banks’ Reduced Participation in Loan Market (2)
9
Post the Global Financial Crisis, there has been a significant impact on traditional financing sources and the global capital markets
– Banks have markedly decreased their underwriting exposure
Regulatory scrutiny has continued to intensify and is particularly noticeable with the Office of the Comptroller of the Currency (“OCC”) leveraged lending guidance. Originally introduced in 2013, but has recently been more broadly enforced to reduce banks’ exposure to certain types of loans.
– Impacting significant portion of high yield and loan markets
Banks’ Cautious Approach
Banks are participating in fewer junior capital transactions or syndicating increasing portions of their exposure
Main requirements for financial institutions underwriting leveraged transactions include: – Leverage: cannot exceed 4x EBITDA for senior debt or 6x for total
debt (including all committed capital and assuming revolvers are drawn)
– Repayment: senior debt must fully amortize or total debt must be reduced by half using free cash flow within 5-7 years
– Covenants: adequate covenant protections, including financial maintenance covenants
– Collateral: protection against dilution, sale or exchange of collateral or cash flow producing assets
Source: (1) FDIC as of December 31, 2016 FDIC-Insured commercial banks and savings institutions. (2) S&P Global Market Intelligence. LCD’s Quarterly Leveraged Lending Review: 1Q17. (3) Non-banks includes institutional investors and finance companies.
40% Decline since 2000
11%
89%
0%
20%
40%
60%
80%
100%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
1Q17
Banks & Securities Firms Non-banks (3)
Middle Market Lending Offers Better Risk-Adjusted Returns
10
Benefits Broadly Syndicated Loans Middle Market Loans
Control Over Credit Documentation
Due Diligence Access Partial Full
Credit Performance – Enhanced
Relationship With Borrower Limited Comprehensive
Hold Size Flexibility / Control
Origination Economics
Premium Asset Spreads
Syndication Control
1
2
3
4
5
6
7
8
Middle market loans historically have had lower default rates and higher recovery rates than broadly syndicated loans
Control of origination for middle market loans is designed to result in better economics and risk-adjusted returns
11
Investment Strategy
Apollo Direct Origination Platform
Premier U.S. Private Debt Platform
12 (1) As of March 31, 2017.
MidCap is a full service finance company focused on
middle market senior debt ~ $7.1 Billion Portfolio (1)
AINV is a business development company or
“BDC” focused on middle market debt
$2.3 Billion Portfolio (1)
AGM is a Leading Alternative Credit Manager with Permanent Capital Vehicles
Focused on Direct Origination
+
Best-in-Class Middle Market Loan Originator
Comprehensive Approach to Originations
13
We believe that Apollo has one of the largest and most diverse origination teams in the marketplace covering a diverse array of end markets
Combined with the recent receipt of exemptive relief to co-invest, we believe that the Apollo platform is one that very few alternative asset managers can compete against
Financial Sponsors
Origination Channels
Wall Street Niche Markets
AINV has completed transactions with 100+ different sponsors
AINV and MidCap unified calling effort into financial sponsors
Ability to offer full suite of products increases relevancy
Specialized industry expertise in areas with high barriers to entry AINV and MidCap specialized
teams AINV has access to all MidCap
specialized teams
Leverage Apollo’s deep relationship with Wall Street intermediaries Apollo buying power provides
good access Potential source of liquidity that
may be used to fund core investments
Direct Origination
Corporate Lending Life Sciences, ABL, Lender Finance and Aviation
Apollo’s Direct Lending Suite
14
Origination Channel Asset Yield AINV MidCap
Corporate Lending
Senior 4% ─ 6%
Stretch Senior 6% ─ 8%
Junior 8% ─ 10.5%
Real Estate Lending 4.5% ─ 7.5%
Life Sciences Lending 9% ─ 12%
Asset─Based Lending 5% ─ 11%
Lender Finance 5.5% ─ 11.5%
Aviation (1) 11% ─ 14%
Total Investments (in billions) $2.3 (2) $7.1 (2)
Primary Mandate
Senior and subordinated debt yielding ~ 8% to
12%
Senior debt yielding ~ 5% to
8%
We believe the Apollo platform has one of the broadest suites of direct lending products in the marketplace
1
2
3
4
5
6
(1) Investment in aviation made via Merx Aviation Finance , LLC, a wholly owned portfolio company. (2) As of March 31, 2017. (3) Co-investments that are subject to the exemptive order are to be pari-passu
Occasional opportunities within certain asset classes will be suitable for
both AINV and MidCap (3)
AINV Investment Strategy
Increase exposure to senior secured loans sourced by Apollo’s direct origination platform
Focus on floating rate loans
Transition away from certain existing specialty verticals
Add exposure in first lien loans in life sciences, asset-based lending, and lender finance
Improve credit quality of portfolio
Emphasize portfolio diversification and avoid outsized single name or industry concentrations
We are in the process of repositioning our investment portfolio in such a way that we believe will have a lower risk profile and less volatility
Specifically, we seek to:
15
With the successful execution of this repositioning plan, we believe that AINV should generate consistent and sustainable ROEs
Corporate Lending ~ 50% ─ 60%
Aircraft Leasing ~15%
Existing Specialty Verticals and Other
~7%
Life Sciences, Asset-Based Lending and Lender Finance
~20% to 25%
Corporate Lending 51%
Aircraft Leasing 18%
Existing Specialty Verticals
25%
Life Sciences & Asset Based
2% Other 5%
Current Portfolio Asset Mix (1) Target Portfolio Asset Mix
AINV Target Portfolio
We are increasing our exposure to senior secured loan sourced by Apollo’s direct origination team, while adding exposure in first lien loans in life sciences, asset-based
lending, and lender finance – areas with significant barriers to entry
16 (1) As of March 31, 2017. On a fair value basis. (2) Existing specialty verticals includes oil & gas, renewables, shipping and structured credit.
(2)
(2)
Significant Progress Repositioning AINV Portfolio
17
(1) Non-core strategies include oil & gas, structured credit, renewables, shipping and commodities. (2) As of March 31, 2017. (3) Includes the repayment of the Company's investments in Craft 2013-1 which occurred in April 2017. (4) Core strategies include corporate lending, aviation, life sciences, asset based and lender finance. (5) The Company has modified the reporting of its interest rate type information to be based on its corporate debt portfolio, exclusive of investments on non-accrual status..
Non-core (1) assets currently account for $535 million or approximately 23% (2) (3) of the investment portfolio Reduced exposure to non-core assets(1) by $372 million(2)(3) since June 30, 2016
• Oil & gas exposure has declined to 6.6% of the portfolio(2) down from 11.6% as of June 30, 2016, measured at fair value
• Structured credit exposure declined to 3.8% of the portfolio(2)(3) down from 9.1% as of June 30, 2016, measured at fair value
• Renewables exposure declined to 7.7% of the portfolio(2) down from 8.9% as of June 30, 2016, measured at fair value
Investing in assets sourced by the Apollo direct origination platform Invested approximately $684 million in our core strategies(4) since July 1, 2016 through May 15, 2017,
including approximately $264 million since April 1, 2017
Increased first lien debt to 45% (2) of the portfolio, at fair value Increased floating rate debt to 84% (2) (5) of the corporate debt portfolio, at fair value
Deployed Capital in Core
Strategies (4)
Significantly Reduced
Exposure to Non-Core
Strategies (1)
Improved Risk Profile / Portfolio
Composition
We believe that we have made considerable progress implementing our strategy
Benefited From Co-Investment
Exemptive Relief (2)
Able to capture meaningful value through an opportunities that would not otherwise be available without the benefit of the co-investment exemptive order Invested $150 million across 10 companies pursuant to our co-investment exemptive order.(2)
Co-Investment Opportunities
18 (1) On March 29, 2016, the Company received an exemptive order from the SEC permitting greater flexibility to participate in co-investment transactions with certain of its affiliates where terms other than price and quantity are negotiated, subject to the conditions included therein. (2) Through March 31, 2017.
AINV received exemptive relief from the SEC permitting it to enter into previously prohibited negotiated joint transactions with other funds / entities
managed by AGM, including MidCap, (1)
We believe that the scale of AINV, MidCap and other Apollo managed capital, on a combined basis, makes us one of the largest market participants uniquely
positioned to make large commitments
We believe exemptive relief to co-invest should improve AINV’s competitive positioning
– Allows AINV to compete more on the basis of size / scale and certainty of execution, rather than simply on price
– Enhances ability to originate larger transactions with the ability to hold and / or syndicate loans
– Expected to increase deal flow ─ number and variety of deals
– Ability to partner with MidCap which provides AINV with access to MidCap’s expertise in niche markets with high barriers to entry
– Already seeing a strong pipeline of co-investment opportunities with MidCap
AINV does not lend to portfolio companies owned by AGM’s private equity funds
Since receiving the order, AINV has invested $150 million across 10 companies, pursuant to the co-investment exemptive order (2)
Co-Investment Example: Westinghouse Electric
Westinghouse Electric (“Westinghouse” or the “Company”) builds, maintains and services nuclear power plants globally
Westinghouse operates in several segments comprised of:
– “ConstructCo”: which have created a free cash flow drain as well as significant operating liabilities from cost overruns
– “ServiceCo”: three segments that provide ongoing maintenance, fuel, repair and decommissioning for plants
The public Japanese conglomerate Toshiba (the “Parent”)
acquired 75%+ of the Company in 2006 for $5 billion+ The Parent wanted the Company to file for bankruptcy before
March 31, 2017 As a result, the Company faced a tight timeline for securing DIP
financing, and approached Apollo given the size of our platform and ability to act quickly to provide a creative capital solution
Apollo ultimately filled the Company’s entire funding need via an $800 million DIP financing at L+625 and a 2.5% OID maturing in 24 months, with a 3% extension fee, implying a YTM of 10-15%+
We believe ServiceCo businesses are fundamentally robust:
The DIP is ~1.7x levered post-overhead, and ~3x+ covered by the enterprise value of ServiceCo which generates robust free cash flow
Ability for Apollo to secure liens on core collateral: The DIP is
highly structured, with tight covenants Stable industry outlook in the short to medium term Downside protection from liquidation value: $750 million to $1
billion of value based on A/R, inventory and U.S. equipment alone
Company & Opportunity Overview Investment Thesis
Investment (Funding) Date Industry Security Type Apollo Platform Cost
3/31/2017 High Tech Industries DIP Term Loan $780 million
Source: Note this factors in a 2.50% OID, the face amount of the DIP is $800mm Investment examples have been provided for discussion purposes only. Information contained in these case studies has been gathered and provided by Apollo analysts. Investment has been selected as it was the largest investment within the illiquid opportunistic credit space in Q1 2017. There is no guarantee that such an investment will become available in the future, or that its objectives will be achieved. Cost as of March 31, 2017. 19
Co Investment Example: Oxford Immunotec
20
Company Overview Oxford Immunotec (or the “Company”) is a commercial-stage diagnostics
company offering innovative tests based on its proprietary T-SPOT platform. T-SPOT measures the activity of T cells, which are an important part of the human body’s immune system, to aid in the diagnosis, prognosis, and monitoring of disease
The T-SPOT platform has potential applications in various infectious diseases, cancers and autoimmune diseases. Oxford Immunotec has initially focused on commercializing T-SPOT.TB, its test for latent Tuberculosis (~$86mm of revenue in 2016; ~40% YOY growth)
The Company is expanding its commercial product offering by developing several additional tests that address medical unmet needs.
Investment Background & Thesis In October 2016, Apollo funded $9.75 million of First Lien TL with an
additional $3.25 million committed through a second tranche
This investment is the fourth as part of AINV’s expansion into the Life Sciences vertical and Apollo believes it represents an attractive risk/return profile
Apollo believes this co-investment transaction is consistent with the proposed broader portfolio repositioning (i.e., 1st lien, well-structured with attractive risk-reward)
The First Lien TL is governed by a minimum net revenue covenant tested quarterly on a TTM basis
Investment thesis:
– The Company’s commercial products have generated revenue growth at a rate of 40% YoY. Assuming a conservative multiple of 1.5x – 2.0x on 2016E sales, this business alone could be valued at $123mm - $162mm
Capital Structure Additional Information Oxford Immunotec is traded on the NASDAQ exchange (OXFD) and has a
current market capitalization of approximately $341mm (as of June 20, 2017). The stock price has ranged from $7.90 - $15.71 over the past 12 months
The Company completed its IPO in late 2013 (net proceeds of $64mm), a follow on offering in early 2015 (net proceeds of $54mm).
The Company recently acquired the assets of Imugen, Inc., a diagnostic lab specializing in tick-borne diseases, for ~$22mm (2x 2015 revenue of $11mm). This business line was profitable on a stand-alone basis, and the Company can leverage its commercial resources as there is a high degree of call point overlap with T-SPOT.TB.
($ in million) LIBORPro Forma Maturity Int. Rate Floor LTV
Cash $ 43.1
Revolver ($10mm) - 5 years L+445 50 bps - First Lien Term Loan 30.0 5 years L+760 50 bps 7.9% Total First Lien Debt $ 30.0 7.9% Equity Market Cap (3/31/17) $ 351.8 92.1%
Enterprise Value $ 381.8 100.0%
LTM Revenue $ 90.5
21
Portfolio and Financial Review
Portfolio Snapshot
Portfolio Key Statistics (1)
Investment Portfolio (2) $2.32 bn
# of Portfolio Companies 86
Weighted Average Yield 10.3%
% Floating Rate (2) (3) 84%
Average Company Exposure (2) $26.9 mn
Median Company Exposure (2) $17.0 mn
Median EBITDA (4) $66 mn
Net Leverage Through AINV Position
At Close 5.50 x
Current 5.54 x
Interest Coverage
At Close 2.50 x
Current 2.51 x
22 (1) As of March 31, 2017. (2) On a fair value basis. (3) The Company has modified the reporting of its interest rate type information to be based on its corporate debt portfolio, exclusive of investments on non-accrual status. (4) Existing specialty verticals includes oil & gas, renewables, shipping and structured credit. (4) At close.
Portfolio by Security Type(1) (2)
Portfolio by Strategy(1) (2)
Corporate Lending
51% Aircraft Leasing
18%
Existing Specialty Verticals
25%
Life Sciences & Asset Based
2%
Other 5%
(4)
First Lien Secured Debt
45% Second Lien Secured Debt
30%
Unsecured Debt 7%
Structured Products and
Other 7%
Preferred Equity 1% Common
Equity/Interests and Warrants
10%
Business Services 22%
Aviation and Consumer Transport
18%
Energy – Electricity 8% Diversified Investment
Vehicles, Banking, Finance, Real Estate
7%
Transportation – Cargo, Distribution
7%
High Tech Industries 7%
Energy – Oil & Gas 7%
Healthcare & Pharmaceuticals
4%
Chemicals, Plastics & Rubber
3%
Manufacturing, Capital Equipment
3%
Other 13%
Non-Sponsored
14%
Sponsored 86%
Portfolio Snapshot (continued)
Portfolio by Industry (1) (2) Sponsored vs. Non-Sponsored (1) (2) (4)
23
(1) On a fair value basis. (2) As of March 31, 2017. (3) Other consists of: Telecommunications; Insurance; Automotive; Utilities – Electric; Advertising, Printing & Publishing; Food & Grocery; Aerospace & Defense; Hotel, Gaming, Leisure, Restaurants; Consumer Goods – Durable; Containers, Packaging & Glass; Media – Diversified & Production; Broadcasting & Subscription; Metals & Mining; Education; and Environmental Industries. (4) The Company has modified the reporting of its sponsored / non-sponsored percentages. The reporting of its sponsored / non-sponsored percentages is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities. (4) The Company has modified the reporting of its sponsored / non-sponsored percentages. The reporting of its sponsored / non-sponsored percentages is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities.
(3)
Portfolio Company Credit Quality
Net Leverage through AINV Position (weighted average by cost)
24
Median LTM EBITDA
$68 $66
$79
$74
Mar-16 Mar-17
At Close Current
5.49 x 5.50 x 5.36x
5.54x
Mar-16 Mar-17
At Close Current
2.52x 2.50x
2.70x
2.51x
Mar-16 Mar-17
At Close Current
Source: Company data. Includes all portfolio company investments except structured products, common equities, warrants and investments on non-accrual status. Also excludes select investments where debt-to-EBITDA is not a relevant or appropriate metric, or data is not available.
Total Cash Interest Coverage (weighted average by cost)
Merx is Well-Diversified
Aircraft by Type (1) (2)
25
66 aircraft
11 aircraft types
37 lessees in 18 countries
Weighted average age of aircraft ~8.5 years
Weighted average lease maturity ~4.5 years
B737-800 42%
A320-200 28%
777-200LRF
6%
A321-200 4%
A319-100 4%
A330-200 4%
E-195 3%
B737-700 3%
E-190 2%
B737-900ER
2% E-170
2%
(1) As of March 31, 2017 (2) Based on base value. (3) Revenue for next four quarters.
Merx Portfolio (1) Aircraft by Region (1) (2)
Asia 29%
North America
21% LATAM
18%
Europe 19%
Africa 5%
Australia 5%
Middle East 3%
Aircraft Value by Lessee (1) (2)
7 7
9 8 8
6 7
6
4 4
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
# of leases maturing by year
8%
6%
6%
5%
4% 4%
4%
4%
4%
3%
3%
3%
3%
3%
3%
2%
2%
2%
2%
2%
25%
19 Lessees Each < 2%
37 Lessees
Staggered Lease Maturity (1) Revenue by Lessee (1) (3)
8.2%
5.6%
5.4%
37 Lessees
Additional Financial Information
Select Balance Sheet Information (1)
Debt Outstanding $0.85 bn
Net Assets $1.48 bn
Net Leverage Ratio (2) 0.55x
Asset Coverage (3) 271%
Net Asset Value Per Share $6.74
Most Recent Quarterly Dividend (4) $0.15
Market Information (5)
Market Capitalization $1.39 bn
Share Price $6.34
Price-to-Book 0.94x
Dividend Yield at Share Price (6) 9.5%
Dividend Yield at NAV (6) 8.9%
26
(1) As of March 31, 2017. (2) Net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash, less foreign currencies at fair value, divided by net assets. (3) The asset coverage ratio for a class of senior securities representing indebtedness is calculated as our total assets, less all liabilities and indebtedness not represented by senior securities, divided by senior securities representing indebtedness. This asset coverage ratio is multiplied by one thousand to determine the Asset Coverage Per Unit. (4) On May 17, 2017, the Board of Directors declared a dividend of $0.15 per common share to shareholders of record as of June 21, 2017 payable on July 6, 2017. (5) As of June 20, 2017. (6) Most recent quarterly dividend annualized divided by share price. There can be no assurances that AINV’s dividend will remain at the current level. (7) Most recent quarterly dividend annualized divided by net asset value per share. There can be no assurances that AINV’s dividend will remain at the current level.
Net Leverage Ratio (1)
27 (1) Net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash, less foreign currencies at fair value, divided by net assets.
AINV has managed down its net leverage ratio over the last several quarters
0.75 x
0.66 x 0.63 x
0.66 x
0.55 x
0.30 x
0.40 x
0.50 x
0.60 x
0.70 x
0.80 x
0.90 x
1.00 x
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17Net Leverage Ratio Target Range Previous Upper Target
Upper Target ~ 0.70x
Lower Target ~ 0.60x
Previous Upper Target ~ 0.75x
Diversified Funding Sources as of March 31, 2017
28 (1) Includes the stated interest expense and commitment fees on the unused portion of the Senior Secured Facility. Excludes amortized debt issuance costs. For the three months ended March 31, 2017. Based on average debt obligations outstanding.
Debt FacilitiesDebt
Issued / Amended
Final Maturity Date Interest Rate
Principal Amount Outstanding (in thousands)
Senior Secured Facility ($1.14 billion) 12/22/2016 12/22/2021 L + 200 bps 200,923$ Senior Secured Notes (Series B) 9/29/2011 9/29/2018 6.25% 16,000 2042 Notes (redeemable on or after 10/15/17) 10/9/2012 10/15/2042 6.625% 150,000 2043 Notes (redeemable on or after 7/15/18) 6/17/2013 7/15/2043 6.875% 150,000 2025 Notes 3/3/2015 3/3/2025 5.25% 350,000$
Weighted Average Annualized Interest Cost (1) & Total Debt Obligations 5.414% 866,923$ Deferred Financing Cost and Debt Discount (18,474) Total Debt Obligations,Net of Deferred Financing Cost and Debt Discount 848,449$
Apollo Investment Corporation has taken several steps to prepare for higher interest rates including: increasing the floating rate portion of the portfolio and issuing fixed rate debt.
Interest Rate Exposure as of March 31, 2017
Funding Sources (3)
Floating Rate Debt Floor Net Investment Income Interest Rate Sensitivity (4)
29
(1) On a fair value basis. (2) The Company has modified the calculation of its interest rate type information. The interest type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status. (3) Based on total debt obligations before deferred financing cost and debt discount. (4) The table shows the estimated annual impact on net investment income of base rate changes in interest rates (considering interest rate floors for floating rate instruments) to our loan portfolio and outstanding debt as of March 31, 2017, assuming no changes in our investment and borrowing structure.
Investment Portfolio (1) (2)
Fixed Rate Debt28%
Floating Rate Debt
9%
Common Equity63%
Fixed Rate Assets
16%
Floating Rate Assets
84%
($ in millions) Par or Cost % of Floating Rate Portfolio
Interest Rate FloorsNo Floor 213$ 18%
< 1.00% 13$ 1%1.00% to 1.24% 913$ 76%
1.25% to 1.49% 47$ 4% 1.50% to 1.74% 9$ 1%
> =1.75% -$ 0%Total 1,196$ 100%
($ in millions, except per share data)
Annual Net Investment
Income
Annual Net Investment Income Per
ShareBasis Point Change
Up 400 basis points 30,703$ 0.140$ Up 300 basis points 22,956$ 0.104$ Up 200 basis points 15,209$ 0.069$ Up 100 basis points 7,462$ 0.034$ Down 100 basis points (468)$ (0.002)$
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Conclusion
Reasons to Own AINV
Apollo affiliation provides significant benefits
Origination platform is highly differentiated versus all other market participants
Receipt of exemptive relief to co-invest enhances competitive positioning
Strategy designed to deliver consistent shareholder returns and a stable NAV
Strong balance sheet, diverse funding sources, and positioned to benefit from higher interest rates
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In our view, AINV is an attractive investment for the following reasons:
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Q&A
33
Appendices
AINV / MidCap Product Overlap
Asset Based
Secured loans to manufacturing, distribution, retail and services companies
Core product consists of revolvers advancing against accounts receivable and inventory; will selectively include term loans against fixed assets or as supported by cash flow
High-touch asset class requiring liquidity for daily revolver fundings, collateral evaluation and diligence expertise, borrowing base monitoring capabilities and complex cash dominion structures
Leverages MidCap’s in-place portfolio and collateral monitoring infrastructure
Life Sciences
Low loan-to-value loans, covered by material asset values and cash on hand, made to borrowers in product development (e.g., biotech companies) or early commercialization
Enterprise value loans
Niche market with what we believe to be disproportionate risk reward – almost no historical losses across market
Typically have multiple sources of exit including strong equity support, well funded balance sheets, and liquidation value
No underwriting of science – only of cash support and development timeline
Lender Finance
Senior secured facilities made to lenders in various industries (consumer and commercial) secured by their underlying collateral
Typically benefit from multiple levels of credit support and protection in addition to support of underlying borrowers
Defined eligibility criteria or loan-by-loan approval, borrowing base structure with ability to remove specific assets, and corporate and/or personal recourse with various restrictive covenants
Highly structured transactions skewing towards larger commitments ($25+ million) to provide diversification of underlying collateral
Significant opportunities exist to fill the capital void left by large banks exiting and descaling in this asset class
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Portfolio Concentration
Top Ten Industries (1)
Average Position Size, at fair value ($ in 000’s)
35 (1) Top ten companies and top ten industries based on market value as of March 31, 2017.
Top Ten Portfolio Companies (1)
$32,773 $32,317 $31,080 $29,722 $26,938
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
Rank Industry Fair Value % of
Portfolio1 Business Services 515,621$ 22.3%2 Aviation and Consumer Transport 422,894 18.3%3 Energy – Electricity 178,966 7.7%4 Diversified Investment Vehicles, Banking, Finance, Real Estate 169,564 7.3%5 Transportation – Cargo, Distribution 166,119 7.2%6 High Tech Industries 165,892 7.2%7 Energy – Oil & Gas 152,331 6.6%8 Healthcare & Pharmaceuticals 101,889 4.4%9 Chemicals, Plastics & Rubber 65,542 2.8%10 Manufacturing, Capital Equipment 64,747 2.7%
Top Ten Total 2,003,566$ 86.5%Other 313,142 13.5%Total Portfolio 2,316,708$ 100.0%
Rank Portfolio Company Fair Value% of
Portfolio1 Merx Aviation Finance, LLC 422,894$ 18.3%2 U.S. Security Associates Holdings, Inc. 135,000 5.8%3 Solarplicity Group Limited (f/k/a AMP Solar UK) 119,426 5.2%4 Spotted Hawk 80,434 3.5%5 MSEA Tankers LLC 72,797 3.1%6 Glacier Oil & Gas Corp. (f/k/a Miller Energy Resources, Inc.) 56,480 2.4%7 Skyline Data, News and Analytics LLC (Dodge) 54,325 2.3%8 UniTek Global Services Inc. 53,441 2.3%9 Access Information 51,313 2.2%
10 Maxus Capital Carbon SPE I, LLC (Skyonic) 50,585 2.2%Top Ten Total 1,096,696$ 47.3%Other 1,220,012 52.7%Total Portfolio 2,316,708$ 100.0%
Aircraft Leasing
36 (1) Source: Airbus. (2) Source: IATA
Favorable Industry Fundamentals
AINV established a wholly owned portfolio company Merx Aviation Finance, LLC (“Merx”) to participate in aircraft leasing
Healthy global passenger traffic expected to continue
– Since the 1970’s, air traffic has roughly doubled every 15 years (1)
– During the past 20 years global passenger traffic has expanded at an average annual growth rate of 5.1%, while global GDP grew by an average annual rate of 3.7% over the same period. (2)
Global fleet growth
Strong demand for leased aircraft driven by movement of aircraft off of airlines’ balance sheets to lessor balance sheets
Rational OEM supply
Long technology cycles
Airlines prospering
Traditional capital providers to the space (other than new deliveries) have been pulling back
Lack of central clearinghouse for aircraft trading causes market to be inefficient
High barriers to entry
Investment Thesis / Strategy Focus on the most liquid and in-demand aircraft
– Generally targeting used current generation Boeing and Airbus commercial aircraft
Older aircraft transactions expected to be protected by the underlying “metal” value of the aircraft
Deploying an opportunistic, transaction driven strategy while leveraging strong relationships and specialized knowledge creates attractive investment opportunities
Continually optimize portfolio through aircraft acquisitions and dispositions
Maintain a highly diversified portfolio in terms of aircraft type, lessee, geography
Financial Highlights
37
(1) Numbers may not sum due to rounding. (2) In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive. For the three months ended March 31, 2017, December 31, 2016, September 30, 2016, and June 30, 2016, the Company did not have any convertible notes. As such, diluted EPS was not applicable. (3) Numbers for March 31, 2016 were updated due to the retrospective application of the new accounting pronouncements (ASU 2015-03 and ASU 2015-15) adopted as of April 1, 2016. (4) The Company’s net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash, less foreign currencies, divided by net assets. (5) On a cost basis. Exclusive of investments on non-accrual status.
($ in thousands, except per share data) 4Q'17 3Q'17 2Q'17 1Q'17 4Q'16Mar-17 Dec-16 Sep-16 Jun-16 Mar-16
Operating Results (1)
Net investment income 37,290$ 36,352$ 39,537$ 36,064$ 44,618$ Net realized and change in unrealized gains (losses) (29,238) (25,062) 1,577 (78,149) (68,015) Net increase (decrease) in net assets resulting from operations 8,052$ 11,290$ 41,114$ (42,086)$ (23,397)$
Net investment income per share 0.17$ 0.17$ 0.18$ 0.16$ 0.20$ Net realized and change in unrealized gain (loss) per share (0.13) (0.12) 0.00 (0.35) (0.30) Earnings (Loss) per share - basic 0.04$ 0.05$ 0.18$ (0.19)$ (0.10)$ Earnings (Loss) per share - diluted (2) N/A N/A N/A N/A (0.10)$
Distribution recorded per common share 0.15$ 0.15$ 0.15$ 0.20$ 0.20$ Select Balance Sheet and Other Data
Investment portfolio (at fair value) 2,316,708$ 2,526,333$ 2,548,568$ 2,617,714$ 2,916,829$ Debt outstanding (3) 848,449$ 1,033,958$ 1,014,794$ 1,098,977$ 1,312,960$ Net assets 1,481,797$ 1,506,699$ 1,541,938$ 1,552,409$ 1,645,581$
Net asset value per share 6.74$ 6.86$ 6.95$ 6.90$ 7.28$
Debt-to-equity ratio (3) 0.57 x 0.69 x 0.66 x 0.71 x 0.80 xNet leverage ratio (3) (4) 0.55 x 0.66 x 0.63 x 0.66 x 0.75 x
Weighted average shares outstanding 219,694,654 220,168,710 223,835,344 225,940,769 226,474,566 Shares outstanding 219,694,654 219,694,654 221,994,770 225,067,696 226,156,496
Number of portfolio companies, at period end 86 85 82 81 89 Weighted Average Yields, at period end (5)
Secured debt 10.2% 10.9% 11.0% 11.0% 11.0%Unsecured debt 11.1% 10.7% 10.8% 10.8% 10.7%Total debt portfolio 10.3% 10.9% 11.0% 11.0% 11.0%
Summary Investment Activity
38 (1) Numbers may not sum due to rounding. (2) Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status.
($ in thousands) 4Q'17 3Q'17 2Q'17 1Q'17 4Q'16Mar-17 Dec-16 Sep-16 Jun-16 Mar-16
Portfolio Activity (1)
Investments made 149,408$ 201,309$ 127,629$ 122,718$ 178,507$ Investments sold (38,393) (17,114) (17,924) (146,040) (189,911) Net investment activity before repayments 111,015$ 184,195$ 109,705$ (23,322)$ (11,404)$ Investments repaid (306,449) (178,208) (197,130) (193,376) (75,380) Net investment activity (195,434)$ 5,987$ (87,425)$ (216,698)$ (86,784)$
Number of portfolio companies, at beginning of period 85 82 81 89 95 Number of new portfolio companies 13 13 6 5 4 Number of exited portfolio companies (12) (10) (5) (13) (10) Number of portfolio companies, at period end 86 85 82 81 89
Number of investments in existing portfolio companies 10 8 10 12 12 Yield on Activity (2)
Yield on investments made 9.8% 10.1% 10.3% 10.8% 11.2%Yield on sales and repayments 9.9% 10.5% 10.7% 10.5% 10.2%
Quarterly Investment Activity
Portfolio Yield (1) (2)
Net Investment Activity ($ in millions) Yield on Investment Activity (2) (3)
39
(1) Weighted average yield on total debt portfolio on a cost basis at period end, exclusive of investments on non-accrual status. (2) Change in terms on investments may impact the weighted average yield of the total debt portfolio but are not reflected in new, sold or repaid investments. (3) Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status.
Investment Activity ($ in millions)
($87)
($217)
($87)
$6
($195)
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
11.2% 10.8%10.3% 10.1%
9.8%
10.5%
11.9%
13.1%
8.8%
10.2%
9.6% 9.9%
10.4%10.7%
9.9%
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17New Investments Sales Repayments
$179
$123 $128 $201 $149
($190) ($146)($18) ($17) ($38)
($75) ($193)
($197) ($178)($306)
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17New Investments Sales Repayments
11.0% 11.0% 11.0% 10.9%10.3%
Mar-16 Jun-16 Sep-16 Dec-16 Mar-17
Detailed Quarterly Investment Activity
40 (1) Numbers may not sum due to rounding. (2) First lien purchases include revolver drawdowns; first lien sales and repayments includes revolver repayments. (3) Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status.
($ in thousands) 4Q'17 3Q'17 2Q'17 1Q'17 4Q'16Mar-17 Dec-16 Sep-16 Jun-16 Mar-16
Purchases (1)
First lien (2) 52,018$ 34,174$ 55,021$ 58,225$ 104,393$ Second lien 92,742 153,657 51,154 46,476 31,510
Total secured debt 144,760 187,831 106,175 104,700 135,903 Unsecured debt 2,499 12,713 5,154 - 18,798 Structured products and other 106 206 16,301 11,270 14,035 Preferred equity - - - - 421 Common equity/interests and warrants 2,043 560 - 6,748 9,350 Total Purchases 149,408$ 201,309$ 127,629$ 122,718$ 178,507$
Yield at Cost on Debt Purchases (3)
First lien 9.2% 10.0% 10.5% 11.2% 11.7%Second lien 10.2% 10.3% 10.0% 10.3% 9.7%
Total secured debt 9.8% 10.2% 10.3% 10.8% 11.2%Unsecured debt 8.0% 8.5% 10.2% N/A N/APreferred equity N/A N/A N/A N/A N/AYield at Cost on Debt Purchases 9.8% 10.1% 10.3% 10.8% 11.2%
Sales and Repayments (1)
First lien (2) 52,662$ 22,904$ 26,172$ 89,874$ 115,085$ Second lien 96,892 35,888 128,578 140,586 80,701
Total secured debt 149,554 58,792 154,750 230,459 195,786 Unsecured debt 92,836 - 4,461 13,473 40,722 Structured products and other 55,102 96,647 48,239 31,561 10,751 Preferred equity - 36,868 306 1,016 157 Common equity/interests and warrants 47,350 3,016 7,298 62,907 17,874 Total Sales and Repayments 344,842$ 195,322$ 215,054$ 339,416$ 265,291$
Yield at Cost on Debt Sales and Repayments (3)
First lien 9.3% 10.5% 10.3% 12.1% 10.9%Second lien 10.1% 9.6% 10.8% 9.8% 9.4%
Total secured debt 9.8% 9.9% 10.7% 10.6% 10.2%Unsecured debt 10.0% N/A 12.0% 9.4% 9.7%Preferred equity N/A 11.5% 4.0% 4.0% 4.0%Yield at Cost on Debt Sales and Repayments 9.9% 10.5% 10.7% 10.5% 10.2%
Yield at Cost on Sales 10.2% 8.8% 13.1% 11.9% 10.5%Yield at Cost on Debt Repayments 9.9% 10.7% 10.4% 9.9% 9.6%
Net Asset Value
Net Asset Value Per Share
Numbers may not sum due to rounding. 41
$6.74 $6.86 $6.95 $6.90 $7.28
Mar-17Dec-16Sep-16Jun-16Mar-16
($ in thousands, except per share data) 4Q'17 3Q'17 2Q'17 1Q'17 4Q'16Mar-17 Dec-16 Sep-16 Jun-16 Mar-16
Per ShareNAV, beginning of period 6.86$ 6.95$ 6.90$ 7.28$ 7.56$
Net investment income 0.17 0.17 0.18 0.16 0.20 Net realized and change in unrealized gain (loss) (0.13) (0.12) 0.00 (0.35) (0.30)
Net increase (decrease) in net assets resulting from operations 0.04 0.05 0.18 (0.19) (0.10) Repurchase of common stock - 0.02 0.02 0.01 0.02 Distribution recorded (0.15) (0.15) (0.15) (0.20) (0.20) NAV, end of period 6.74 6.86 6.95 6.90 7.28
TotalNAV, beginning of period 1,506,699$ 1,541,938$ 1,552,409$ 1,645,581$ 1,724,209$
Net investment income 37,290 36,352 39,537 36,064 44,618 Net realized and change in unrealized gains (losses) (29,238) (25,062) 1,577 (78,150) (68,015)
Net increase (decrease) in net assets resulting from operations 8,052 11,290 41,114 (42,086) (23,397) Repurchase of common stock - (13,575) (18,270) (6,073) (10,000) Distributions recorded (32,954) (32,954) (33,315) (45,013) (45,231) NAV, end of period 1,481,797$ 1,506,699$ 1,541,938$ 1,552,409$ 1,645,581$
Portfolio Composition
42
($ in thousands) 4Q'17 3Q'17 2Q'17 1Q'17 4Q'16Mar-17 Dec-16 Sep-16 Jun-16 Mar-16
Portfolio Composition, measured at fair value ($)First lien 1,049,232$ 1,052,890$ 1,060,606$ 1,055,120$ 1,106,150$ Second lien 685,268 683,858 559,782 647,203 799,752
Total secured debt 1,734,500$ 1,736,748$ 1,620,388$ 1,702,323$ 1,905,903$ Unsecured debt 161,385 249,121 234,645 233,136 255,823 Structured products and other 166,893 217,748 307,052 315,443 329,602 Preferred equity 25,637 30,785 67,602 67,538 68,562 Common equity/interests and warrants 228,293 291,930 318,881 299,274 356,940 Total investment portfolio 2,316,708$ 2,526,333$ 2,548,568$ 2,617,714$ 2,916,829$
Portfolio Composition, measured at fair value (%)First lien 45% 42% 42% 40% 38%Second lien 30% 27% 22% 25% 27%
Total secured debt 75% 69% 64% 65% 65%Unsecured debt 7% 10% 9% 9% 9%Structured products and other 7% 9% 12% 12% 11%Preferred equity 1% 1% 3% 3% 2%Common equity/interests and warrants 10% 11% 12% 11% 13%
Portfolio Composition by Strategy, measured at fair value (%)Core strategies (1) 71% 66% 61% 59% 57%Non-core strategites (2) 24% 29% 34% 35% 33%Legacy & Other 5% 5% 5% 6% 9%
Interest Rate Type, measured at fair value (3)
Fixed rate % 16% 16% 21% 23% 24%Floating rate % 84% 84% 79% 77% 76%
Sponsored / Non-sponsored, measured at fair value (4)
Sponsored % 86% 86% 84% 86% 85%Non-sponsored % 14% 14% 16% 14% 15%
(1) Core strategies include corporate lending, aviation, life sciences, asset based and lender finance. (2) Non-core strategies include oil & gas, structured credit, renewables, shipping and commodities. (3) The Company has modified the calculation of its interest rate type information. The interest type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status. Prior periods have been modified to reflect this definition. (4) The Company has modified the reporting of its sponsored / non-sponsored percentages. The reporting of its sponsored / non-sponsored percentages is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities. Prior periods have been modified to reflect this definition.
Credit Quality As of March 31, 2017, 7.0% of total investments at amortized cost, or 3.0% of total investments at fair value, were on non-accrual status.
43 (1) Source: Company data. Includes all portfolio company investments except structured products, common equities, warrants and investments on non-accrual status. Also excludes select investments where debt-to-EBITDA is not a relevant or appropriate metric, or data is not available. Weighted average by cost. (2) The investments in SquareTwo Financial Corporation are included in AIC SPV Holdings I, LLC.
($ in thousands) 3Q'17 3Q'17 2Q'17 1Q'17 4Q'16Mar-17 Dec-16 Sep-16 Jun-16 Mar-16
Investments on Non-Accrual StatusNon-accrual investments at amortized cost 183,141$ 236,453$ 312,955$ 339,970$ 259,166$ Non-accrual investments / total portfolio, at amortized cost 7.0% 8.2% 11.1% 11.8% 8.4%Non-accrual investments at fair value 68,571$ 65,587$ 99,521$ 118,292$ 121,508$ Non-accrual investments / total portfolio, at fair value 3.0% 2.6% 3.9% 4.5% 4.2%
Portfolio Company Credit Metrics (1)
Net Leverage (Close) 5.5 x 5.6 x 5.6 x 5.6 x 5.5 xNet Leverage (Current) 5.5 x 5.7 x 5.5 x 5.4 x 5.4 xInterest Coverage (Close) 2.5 x 2.4 x 2.5 x 2.5 x 2.5 xInterest Coverage (Current) 2.5 x 2.5 x 2.6 x 2.8 x 2.7 x
($ in thousands) Industry Cost Fair Value
Investments on Non-Accrual Status as of March 31, 2017 Gryphon Colleges Corporation / (Delta Educational Systems) Education 34,549 - Magnetation, LLC Metals & Mining 12,427 705 Pelican Energy – Oil & Gas 26,665 15,417 Spotted Hawk Energy – Oil & Gas 44,380 32,793
SquareTwo (CA Holdings, Collect America, Ltd.) (2) Diversified Investment Vehicles, Banking, Finance, Real Estate
64,783 19,656
Venoco Inc. Energy – Oil & Gas 338 - Total 183,141$ 68,571$
Contact Information
For more information, please contact: Elizabeth Besen Investor Relations Manager Phone: (212) 822-0625 Email: [email protected] Gregory W. Hunt Chief Financial Officer and Treasurer Phone: (212) 822-0655 Email: [email protected]
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