Investor Presentation May 2018 Unless otherwise noted, information - - PowerPoint PPT Presentation
A P O L L O I N V E S T M E N T C O R P O R A T I O N Investor Presentation May 2018 Unless otherwise noted, information as of March 31, 2018 It should not be assumed that investments made in the future will be profitable or will equal the
Unless otherwise noted, information as of March 31, 2018 It should not be assumed that investments made in the future will be profitable or will equal the performance of the investments shown in this document.
A P O L L O I N V E S T M E N T C O R P O R A T I O N
2 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
“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 investing including 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; 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”) 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. This presentation does not constitute a prospectus and should under no circumstances be understood as an offer to sell or the solicitation of an offer to buy any securities of AINV. 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 and annual financial information for the Corporation refers to fiscal periods. 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
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.
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1 On a fair value basis. 2 As of March 31, 2018 3 Apollo Investment Management, L.P. 4 See definition of AUM at beginning of presentation. 5 MidCap Financial refers to MidCap FinCo Designated Activity Company, 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 The Company announced that on April 4, 2018, its Board of Directors approved the application of the modified asset coverage requirements set forth in new Section 61(a)(2) of the Investment Company Act of 1940, as amended by The Small Business Credit Availability Act (“SBCAA”). As a result, the asset coverage ratio test applicable to the Company will be decreased from 200% to 150%, effective April 4, 2019. 7 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. 8 As of May 21, 2018. 9 Most recent quarterly dividend annualized divided by share price. There can be no assurances that AINV’s dividend will remain at the current level. 10 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.
Specialty Finance Company Focused on Lending to US Middle Market Companies
company (“RIC”) for tax purposes
types 1,2 Externally Managed by Apollo Global Management
approximately $247 billion of AUM 2,4 with expertise in private equity, credit and real estate
Competitive Advantages Apollo Affiliation
significant benefits
engine across AINV and MidCap Financial (“MidCap”) 5 Increase in Regulatory Leverage
from increase in regulatory leverage 6 Exemptive Relief to Co-Invest 7
competitive positioning
Current Market Information 8 Market capitalization $1.20 billion Dividend yield at market price 9 10.8% Dividend yield at NAV 10 9.1%
Investment Approach
Value-Oriented Contrarian Integrated Investment Platform Opportunistic Across Market Cycles and Capital Structures Focus on 9 Core Industries Founded: 1990 AUM: $247 billion Employees: 1,030
Global Offices: 15
1 As of March 31, 2018. See definition of AUM at beginning of presentation Note: AUM components may not sum due to rounding.
Global Footprint Credit $165bn AUM
investments
investments
(CMBS, CRE Loans)
Firm Profile1 Business Segments
Toronto Bethesda Chicago
Chicago New York Bethesda Houston Los Angeles London Madrid Frankfurt Luxembourg Delhi Mumbai Shanghai Hong Kong Singapore Toronto
Private Equity $69bn AUM Real Assets $13bn AUM
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Apollo manages more than 100 discrete funds or accounts across a broad set of investment strategies
Note: As of March 31, 2018. Diagram is illustrative in nature with bubbles banded by approximate return targets and size of bubbles representing magnitude of AUM. Identified pockets of AUM may not sum due to double counting.
Opportunistic Strategies Target Return
Athene & Athora ($85bn) CLOs ($12bn) MidCap ($8bn) Hedge Funds ($7bn) Drawdown Funds ($28bn) Managed Accounts Total Return ($4bn) EM Debt
$137 billion of AUM including $100 billion in Credit Permanent Capital Vehicles $28 billion of AUM Yield-Oriented Strategies
Illustrative Composition of Apollo’s Credit Business
<5% 5-10% 10-15% 15%+
$165 billion of AUM
Athene & Athora ($87bn)
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1 As of March 31, 2018. 2 Apollo Investment Management, L.P. (AIM), the investment adviser to Apollo Investment Corporation, is a non-controlling member of CION Investment Management, LLC (CIM), the investment adviser to CION Investment Corporation (CION). AIM performs sourcing services for CIM, which include, among other services, (i) identifying and providing information about potential investment opportunities for approval by CIM’s investment committee; (ii) providing (a) trade and settlement support; (b) portfolio and cash reconciliation; (c) market pipeline information regarding syndicated deals, in each case, as reasonably requested by CIM; and (d) monthly valuation reports and support for all broker-quoted investments. AIM has a limited role as a member of CIM and does not provide advice, evaluation, or recommendation with respect to the CION’s investments. All of CION’s investment decisions are the sole responsibility of, and are made at the sole discretion of, CIM.
Apollo Investment Corporation MidCap CION Investment Corporation 2
under the Investment Company Act of 1940 and regulated investment company (RIC) for tax purposes
solutions to US middle market companies
Market
90 companies 1
directly sourced middle market senior debt
leveraged loans, real estate and venture lending
affiliated with Apollo Global
distinct positions 1
a RIC for tax purposes
solutions to US middle market companies
Additional capacity in select opportunistic credit accounts
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Encompasses an array of origination verticals and a comprehensive suite of products
Origination Channels Business Segments Product Capabilities
Direct Origination
Apollo
products increase relevancy
areas with high barriers to entry
specialized teams Wall Street
relationship with Wall Street intermediaries
good access
may be used to fund core investments
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1 The Company announced that on April 4, 2018, its Board of Directors approved the application of the modified asset coverage requirements set forth in new Section 61(a)(2) of the Investment Company Act of 1940, as amended by The Small Business Credit Availability Act (“SBCAA”). As a result, the asset coverage ratio test applicable to the Company will be decreased from 200% to 150%, effective April 4, 2019. 2 Reflects the views of Apollo.
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teams
deals based on size / certainty of execution
by the Apollo platform
Designed to provide consistent and stable returns for shareholders
1 Core strategies include corporate lending, aviation, life sciences, asset based and lender finance. 2. 7 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. 3 Non-core strategies include oil & gas, structured credit, renewables, shipping and commodities 4 The Company announced that on April 4, 2018, its Board of Directors approved the application of the modified asset coverage requirements set forth in new Section 61(a)(2) of the Investment Company Act of 1940, as amended by The Small Business Credit Availability Act (“SBCAA”). As a result, the asset coverage ratio test applicable to the Company will be decreased from 200% to 150%, effective April 4, 2019.
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Closely aligns the incentives of the manager with the interests of shareholders
1 Effective April 1, 2018. 2 The Company announced that on April 4, 2018, its Board of Directors approved the application of the modified asset coverage requirements set forth in new Section 61(a)(2) of the Investment Company Act of 1940, as amended by The Small Business Credit Availability Act (“SBCAA”). As a result, the asset coverage ratio test applicable to the Company will be decreased from 200% to 150%, effective April 4, 2019. 3 The calculation of the incentive fee with the total return requirement will begin on January 1, 2019. The incentive fee rate and performance threshold remain 20% and 7% respectively. There is no change to the catch-up provision. For the period between April 1, 2018 through December 31, 2018, the incentive fee rate will be waived to15%, subject to the 7% annualized performance threshold.
gross assets to
The combination of AINV’s new fee structure and active stock repurchase program demonstrate
59% 41%
As of June 30, 2016
Core Strategies Non-Core and Legacy Strategies 77% 23%
As of March 31, 2018
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Portfolio Exposure to Core vs. Non-Core and Legacy Strategies 3
Deployed significant capital into core strategies 1 and meaningfully reduced exposure to non-core strategies 2
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. On a fair value basis. 4. From July 1, 2016 through March 31, 2018.
Over the past 7 quarters, invested $1.2 billion in core strategies 4
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1 Non-core strategies include oil & gas, structured credit, renewables, shipping and commodities. On a fair value basis.
$304 $185 $232 $70 $133 $156 $238 $25 $907 $435 100 200 300 400 500 600 700 800 900 1000 6/30/2016 3/31/2018
Chart Title
Oil & Gas Renewables Shipping Structured Credit
(12%) (9%) (5%) (9%) (1%) (7%) (3%) (8%) Non-Core Assets ($ in millions) Over the past 7 quarters, reduced exposure to non-core strategies by $472 million 4
40% 60%
As of June 30, 2016 First Lien Secured Debt Second Lien Secured Debt, Unsecured Debt, Structured Products and Other, Preferred Equity, Common Equity / Interests and Warrants
50% 50%
As of March 31, 2018
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Portfolio Exposure to First Lien Debt 1
Over the past 7 quarters, 51% of total deployment was in first lien debt 2
Over the past 7 quarters, 51% of total deployment was in first lien debt
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77% 23%
As of June 30, 2016
Floating Rate Debt Fixed Rate Debt 92% 8%
As of March 31, 2018 Portfolio Exposure to Floating Rate Debt 1 2
accrual status. 3. From July 1, 2016 through March 31, 2018
Over the past 7 quarters, 100% of total deployment was in floating rate debt 2
25% 5% 10% 1% 59%
41% of total deployment has been in investments made pursuant to co- investment order
Leveraged Loans Life Sciences Asset Based Lender Finance Non Co-investment
Co-Investment Deployment Over Past 7 Quarters 2
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We believe our ability to co-invest with other Apollo managed capital makes us one of the largest market participants that is well positioned to make large commitments
negotiated, subject to the conditions included therein. 2. From July 1, 2016 through March 31, 2018. 3. As of March 31, 2018. On a fair value basis.
22% 78%
22% of the portfolio is in investments made pursuant to co-investment order
Order Co-Investments Non-Order Co-Investments
Co-Investments Outstanding 3
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1 The Company announced that on April 4, 2018, its Board of Directors approved the application of the modified asset coverage requirements set forth in new Section 61(a)(2) of the Investment Company Act of 1940, as amended by The Small Business Credit Availability Act (“SBCAA”). As a result, the asset coverage ratio test applicable to the Company will be decreased from 200% to 150%, effective April 4, 2019. 2 On a fair value basis. As of March 31, 2018. Excludes non-core and legacy assets which represent 23% of the portfolio.
21% 25% 55% 39% 30% 10% 6% 6% 20% 15% 4% 10% 10% 23% 15% 10% 0% 20% 40% 60% 80% 100% 120% Currrent Portfolio Original Target Portfolio Revised Target Portfolio (based on increased leverage)
Chart Title
First Lien Leveraged Loans Second Lien Leveraged Loans Unsecured Debt Asset Based Life Sciences Merx
80% first lien* (ex Merx) 55% first lien* (ex Merx)
* * *
2 31% first lien* (ex Merx)
* * *
Evolution of Portfolio We intend to use incremental investment capacity to substantially increase our exposure to first lien assets
* * *
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1 As of March 31, 2018. 2 On a fair basis. 3 On total debt portfolio. At amortized cost, exclusive of investment on non-accrual status. 4 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. 5 The sponsored/non-sponsored percentages are calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities. 6 Current. 11 Existing specialty verticals includes oil & gas, renewables, shipping and structured credit. 10 Non-core strategies include oil & gas, structured credit, renewables, shipping and commodities Investment Portfolio2 $2.25 bn # of Portfolio Companies 90 Weighted Average Yield3 10.7% % Floating Rate2,4 92% % Sponsored2,,5 81% Average Company Exposure2 $25.0 mn Median Company Exposure2 $16.0 mn Median EBITDA6 $81 mn Net Leverage Through AINV Position6 5.51 x Interest Coverage6 2.49 x 1
Portfolio Key Statistics1 Portfolio by Security Type1,2
50% 31% 5% 3% 1% 9% First Lien Debt Second Lien Debt Unsecured Debt Structured Products and Other Preferred Equity Common Equity and Warrants
Portfolio by Strategy1,2, 10
51% 18% 19% 8% 4%
Corporate Lending Aircraft Leasing Non-Core Life Sciences, Asset Based and Lender Finance Legacy
Portfolio by Industry1,2
18.4% 17.9% 11.3% 8.2% 8.0% 6.8% 3.8% 3.0% 3.0% 2.8% 16.8% Business Services Aviation and Consumer Transport Healthcare & Pharmaceuticals Energy – Oil & Gas Transportation – Cargo, Distribution High Tech Industries Energy – Electricity Aerospace & Defense Telecommunications Chemicals, Plastics & Rubber Other 3
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Represents 17.9% of AINV’s investment portfolio 1, 2
88 aircraft 11 aircraft types 46 lessees in 26 countries Weighted average age of aircraft ~9.2 years Weighted average lease maturity ~4.6 years Merx Portfolio1 Aircraft by Type1,3 Aircraft by Region1,3 Staggered Lease Maturity1 Aircraft Value by Lessee1,2 Revenue by Lessee1,4
43% 29% 6% 5% 3% 3% 3% 3% 2%2% 1% B737-800 A320-200 B777-200F A321-200 A319-100 A330-200 E-195 B737-700 E-190 B737-900ER E-170 31.9% 25.2% 20.7% 12.0% 3.8% 3.5% 2.9% Asia Europe North America LATAM Africa Australia Middle East 2 8 14 13 7 11 12 8 9 3 1 2 4 6 8 10 12 14 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 # of leases maturing by year 8% 6% 6% 4% 4% 4% 3% 3% 3% 3% 3% 3% 3% 3% 2% 2% 2% 2% 2% 2% 31% 27 Lessees Each < 2% 46 Lessees
0.0% 8.60% 5.87% 5.30% 4.33% 4.04% 4.00% 3.88% 3.58% 3.50% 3.48% 3.33% 3.14% 2.47% 2.34% 2.12% 2.03% 2.00% 1.98% 1.87% 1.86% 1.82% 1.80% 1.72% 1.70% 1.61% 1.58% 1.55% 1.43% 1.37% 1.36% 1.31% 1.26% 1.11% 1.07% 1.02% 1.02% 1.00% 0.93% 0.90% 0.88% 0.88% 0.82% 0.66% 0.64% 0.56%0.25%
46 Lessees 1 As of March 31, 2018 2 On a fair value basis. 3 Based on base value. 4 Revenue for next four quarters. For more information about Merx, please visit www.merxaviation.com.
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1 Top ten portfolio companies and top ten industries based on market value as of March 31 2018. $ in thousands.
Top Ten Portfolio Companies1 ($ in millions) Top Ten Industries1 ($ in millions) Average Position Size, at fair value ($ in millions) $26.9 $28.8 $27.1 $27.4 $25.0 0.0 7.0 14.0 21.0 28.0 35.0 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18
Rank Industry Fair Value % of Portfolio 1 Business Services $413 18.4% 2 Aviation and Consumer Transport 402 17.9% 3 Healthcare & Pharmaceuticals 253 11.3% 4 Energy – Oil & Gas 184 8.2% 5 Transportation – Cargo, Distribution 181 8.0% 6 High Tech Industries 154 6.8% 7 Energy – Electricity 86 3.8% 8 Aerospace & Defense 68 3.0% 9 Telecommunications 68 3.0% 10 Chemicals, Plastics & Rubber $64 2.8% Top Ten Total $1,872 83.3% Other $376 16.7% Total Portfolio $2,248 100.0%
Rank Portfolio Company Fair Value % of Portfolio 1 Merx Aviation Finance, LLC $402 17.9% 2 Spotted Hawk 105 4.7% 3 Dynamic Product Tankers (Prime), LLC 83 3.7% 4 U.S. Security Associates Holdings, Inc. 80 3.6% 5 MSEA Tankers LLC 72 3.2% 6 Glacier Oil & Gas Corp. (f/k/a Miller Energy Resources, Inc.) 66 2.9% 7 Skyline Data, News and Analytics LLC (Dodge) 52 2.3% 8 Genesis Healthcare, Inc. 47 2.1% 9 Carbonfree Chemicals SPE I LLC (f/k/a Maxus Capital Carbon SPE I LLC) 47 2.1% 10 UniTek Global Services Inc. $45 2.0% Top Ten Total $1,001 44.5% Other $1,247 55.5% Total Portfolio $2,248 100.0%
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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.
Median LTM EBITDA Net Leverage through AINV Position
(weighted average by cost)
Total Cash Interest Coverage
(weighted average by cost) $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 At Close Current 2.00x 3.00x 4.00x 5.00x 6.00x 7.00x 8.00x Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 At Close Current 0.00x 0.50x 1.00x 1.50x 2.00x 2.50x 3.00x 3.50x 4.00x Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 At Close Current
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For detailed information on risks relating to AINV, see the latest 10-K and subsequent quarterly reports on Form 10-Q, filed with the SEC. 1 The Company announced that on April 4, 2018, its Board of Directors approved the application of the modified asset coverage requirements set forth in new Section 61(a)(2) of the Investment Company Act of 1940, as amended by The Small Business Credit Availability Act (“SBCAA”). As a result, the asset coverage ratio test applicable to the Company will be decreased from 200% to 150%, effective April 4, 2019. 2 Reflects the views of Apollo. 3 See page 13.
1 Apollo affiliation provides significant benefits 2 Origination platform is highly differentiated versus other market participants 3 Uniquely positioned to benefit from increase in regulatory leverage 1 2 4 Receipt of exemptive relief to co-invest enhances competitive positioning 5 Strategy designed to deliver consistent shareholder returns and a stable NAV 6 Well-positioned to benefit from rising interest rates 7 Strong balance sheet and diverse funding sources 8 Revised fee structure 3 9 Active share repurchase program
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Asset Based
term loans against fixed assets or as supported by cash flow
expertise, borrowing base monitoring capabilities and complex cash dominion structures
Life Sciences
development (e.g., biotech companies) or early commercialization
market
liquidation value
Lender Finance
underlying collateral
borrowers
assets, and corporate and/or personal recourse with various restrictive covenants
underlying collateral
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Investment process is subject to change. 1 On a fair value basis. 2 As of March 31, 2018. 3 The sponsored/non-sponsored percentages are calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities. 4 See definition of AUM at beginning of presentation.
Deal Sourcing Underwriting & Due Diligence Structuring, Pricing & Approval Portfolio Monitoring Multi-Channel Sourcing Engine Focus on Risk- Adjusted Returns Protect Downside Risk Comprehensive and Regular Review and Dialogue
sponsor transactions with a focus on specialty verticals
sponsors
is sponsor-backed1,2,3
AUM ~$165 billion2,4
philosophy
Apollo platform
companies
reviews
valuation for non-quoted investments
assistance
problem investments
for managing problem investments
covenants, collateral package, prepayment protection, Board seat or observation rights
approval
and vote on new deals
personnel from across Apollo
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A P O L L O I N V E S T M E N T C O R P O R A T I O N
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. Words such as “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 investing including 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
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; 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”) 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 and annual financial information for the Corporation refers to fiscal periods.
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Fourth quarter of fiscal year 2018 (Three months ended March 31, 2018) and other recent highlights
1 The Company announced that on April 4, 2018, its Board of Directors approved the application of the modified asset coverage requirements set forth in new Section 61(a)(2) of the Investment Company Act of 1940, as amended by The Small Business Credit Availability Act (“SBCAA”). As a result, the asset coverage ratio test applicable to the Company will be decreased from 200% to 150%, effective April 4, 2019. 2 The Company’s net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash and cash equivalents, less foreign currencies, divided by net assets. 3 On March 29, 2016, the Company received an exemptive
strategies include corporate lending, aviation, life sciences, asset based and lender finance.
33 Executive Officer Appointments
Officer since 2006. Mr. Zelter will continue to serve as a Director and Mr. Widra has been named as a Director.
Company’s Investment Adviser.
Fee Structure Changes
equity and to 1.0% of gross assets in excess of 1.0x debt-to-equity. The tiered management fee structure has been established as a result of the reduction in the Company's applicable asset coverage test.1 For purposes of calculating the base management fee, the definition of gross assets has been revised to exclude cash and cash equivalents.
with the total return requirement will begin on January 1, 2019. The incentive fee rate and performance threshold remain 20% and 7% respectively. There is no change to the catch-up
Fiscal Fourth Quarter Results
ended December 31, 2017
increased NAV per share by $0.01
1 Numbers may not sum due to rounding. 2 The Company’s net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash and cash equivalents, less foreign currencies, divided by net assets. 3 On a cost basis. Exclusive of investments on non-accrual status. 4 On a cost basis. Inclusive of all income generating investments, non-income generating investments and investments on non-accrual status.
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($ in thousands, except per share data) 4Q'18 3Q'18 2Q'18 1Q'18 4Q'17 Mar-18 Dec-17 Sep-17 Jun-17 Mar-17 Operating Results1 Net investment income $31,943 $33,966 $34,157 $33,320 $37,290 Net realized and change in unrealized gains (losses) from investments and foreign currencies (11,316) (22,342) (2,370) (4,539) (29,238) Net realized loss on extinguishment of debt – (5,790) – – – Net increase in net assets resulting from operations $20,627 $5,834 $31,787 $28,781 $8,052 Net investment income per share $0.15 $0.16 $0.16 $0.15 $0.17 Net realized and change in unrealized gains (losses) from investments and foreign currencies p/s ($0.05) ($0.10) ($0.01) ($0.02) ($0.13) Net realized loss on extinguishment of debt per share – ($0.03) – – – Earnings per share $0.10 $0.03 $0.14 $0.13 $0.04 Distribution recorded per common share $0.15 $0.15 $0.15 $0.15 $0.15 Select Balance Sheet and Other Data Investment portfolio (at fair value) $2,248,047 $2,352,562 $2,360,290 $2,416,579 $2,316,708 Debt outstanding $789,846 $875,165 $864,906 $920,674 $848,449 Net assets $1,418,086 $1,441,050 $1,472,600 $1,477,624 $1,481,797 Net asset value per share $6.56 $6.60 $6.72 $6.73 $6.74 Debt-to-equity ratio 0.56 x 0.61 x 0.59 x 0.62 x 0.57 x Net leverage ratio2 0.57 x 0.62 x 0.59 x 0.62 x 0.55 x Weighted average shares outstanding 216,700,552 218,550,180 219,519,803 219,694,654 219,694,654 Shares outstanding 216,312,096 218,255,954 219,034,354 219,694,654 219,694,654 Number of portfolio companies, at period end 90 86 87 84 86 Weighted Average Yields, at period end Secured debt3 10.7% 10.5% 10.3% 10.2% 10.2% Unsecured debt3 11.3% 11.2% 11.2% 11.1% 11.1% Total debt portfolio3 10.7% 10.5% 10.3% 10.3% 10.3% Total portfolio4 9.6% 9.6% 9.7% 9.7% 8.7%
1 Numbers may not sum due to rounding. 2 Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status.
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($ in thousands) 4Q'18 3Q'18 2Q'18 1Q'18 4Q'17 Mar-18 Dec-17 Sep-17 Jun-17 Mar-17 Portfolio Activity1 Investments made $243,329 $198,355 $265,439 $342,036 $149,408 Investments sold (119,302) (48,084) (11,703) (9,949) (38,393) Net investment activity before repayments $124,027 $150,271 $253,737 $332,087 $111,015 Investments repaid (238,131) (156,716) (328,096) (241,998) (306,449) Net investment activity ($114,104) ($6,445) ($74,359) $90,089 ($195,434) Number of portfolio companies, at beginning of period 86 87 84 86 85 Number of new portfolio companies 8 8 12 11 13 Number of exited portfolio companies (4) (9) (9) (13) (12) Number of portfolio companies, at period end 90 86 87 84 86 Number of investments in existing portfolio companies 19 12 11 11 10 Yield on Activity2 Yield on investments made 9.7% 9.9% 10.0% 10.3% 9.8% Yield on debt sales and repayments 9.6% 10.2% 10.3% 11.3% 9.9%
Investment Activity ($ in millions) Total Debt Portfolio Yield1,2
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.
Net Investment Activity ($ in millions) Yield on Investment Activity2,3
36 $149 $342 $265 $198 $243 ($38) ($10) ($12) ($48) ($119) ($306) ($242) ($328) ($157) ($238) Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 New Investments Sales Repayments ($195) $90 ($74) ($6) ($114) Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 10.3% 10.3% 10.3% 10.5% 10.7% Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 9.8% 10.3% 10.0% 9.9% 9.7% 10.2% 9.4% 9.3% 10.2% 7.6% 9.9% 11.4% 10.3% 10.2% 10.8% Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 New Investments Sales Repayments
1 Numbers may not sum due to rounding. 2 First lien purchases include revolver drawdowns; first lien sales and repayments includes revolver repayments. 3 Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status.
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($ in thousands) 4Q'18 3Q'18 2Q'18 1Q'18 4Q'17 Mar-18 Dec-17 Sep-17 Jun-17 Mar-17 Purchases1 First lien2 $186,265 $108,008 $111,229 $236,735 $52,018 Second lien 49,426 89,544 152,972 103,819 92,742 Total secured debt 235,691 197,552 264,201 340,554 144,760 Unsecured debt – – – 2,499 Structured products and other 47 – – – 106 Preferred equity 333 – – – Common equity/interests and warrants 7,258 803 1,238 1,481 2,043 Total Purchases $243,329 $198,355 $265,439 $342,036 $149,408 Yield at Cost on Debt Purchases3 First lien 9.5% 9.3% 9.3% 10.3% 9.2% Second lien 10.3% 10.7% 10.4% 10.3% 10.2% Total secured debt 9.7% 9.9% 10.0% 10.3% 9.8% Unsecured debt N/A N/A N/A N/A 8.0% Preferred equity N/A N/A N/A N/A N/A Yield at Cost on Debt Purchases 9.7% 9.9% 10.0% 10.3% 9.8% Sales and Repayments1 First lien2 $228,989 $79,659 $128,848 $136,063 $52,662 Second lien 91,255 90,981 140,034 53,838 96,892 Total secured debt 320,243 170,639 268,882 189,901 149,554 Unsecured debt 2,060 55 55,000 92,836 Structured products and other 27,349 27,292 8,961 33,166 55,102 Preferred equity Common equity/interests and warrants 7,780 6,814 6,956 28,879 47,350 Total Sales and Repayments $357,433 $204,800 $339,799 $251,947 $344,842 Yield at Cost on Debt Sales and Repayments3 First lien 9.0% 10.0% 10.4% 12.0% 9.3% Second lien 11.2% 10.5% 9.9% 9.7% 10.1% Total secured debt 9.6% 10.2% 10.1% 11.3% 9.8% Unsecured debt 10.2% 13.0% 11.0% N/A 10.0% Preferred equity N/A N/A N/A N/A N/A Yield at Cost on Debt Sales and Repayments 9.6% 10.2% 10.3% 11.3% 9.9% Yield at Cost on Sales 7.6% 10.2% 9.3% 9.4% 10.2% Yield at Cost on Debt Repayments 10.8% 10.2% 10.3% 11.4% 9.9%
Numbers may not sum due to rounding.
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Net Asset Value Per Share
$6.56 $6.60 $6.72 $6.73 $6.74 Mar-18 Dec-17 Sep-17 Jun-17 Mar-17
($ in thousands, except per share data) 4Q'18 3Q'18 2Q'18 1Q'18 4Q'17 Mar-18 Dec-17 Sep-17 Jun-17 Mar-17 Per Share NAV, beginning of period $6.60 $6.72 $6.73 $6.74 $6.86 Net investment income 0.15 0.16 0.16 0.15 0.17 Net realized and change in unrealized gain (loss) (0.05) (0.10) (0.01) (0.02) (0.13) Net realized loss on extinguishment of debt – (0.03) – – – Net increase (decrease) in net assets resulting from operations 0.10 0.03 0.14 0.13 0.04 Repurchase of common stock 0.01 0.00 0.00 – – Distribution recorded (0.15) (0.15) (0.15) (0.15) (0.15) NAV, end of period $6.56 $6.60 $6.72 $6.73 $6.74 Total NAV, beginning of period $1,441,050 $1,472,600 $1,477,624 $1,481,797 $1,506,699 Net investment income 31,943 33,966 34,157 33,320 37,290 Net realized and change in unrealized gains (losses) (11,316) (22,342) (2,370) (4,539) (29,238) Net realized loss on extinguishment of debt – (5,790) – – – Net increase (decrease) in net assets resulting from operations 20,627 5,834 31,787 28,781 8,052 Repurchase of common stock (11,145) (4,645) (3,956) Distributions recorded (32,447) (32,738) (32,855) (32,954) (32,954) NAV, end of period $1,418,086 $1,441,050 $1,472,600 $1,477,624 $1,481,797
By Asset Class1 Fixed Rate vs. Floating Rate1,2
1 On a fair value basis. 2 The interest type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual
Electric; Consumer Goods – Non-durable; Consumer Services; Insurance; Containers, Packaging & Glass; Media – Diversified & Production; Hotel, Gaming, Leisure, Restaurants and Metals & Mining.. 4 The sponsored/non- sponsored percentages are calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities.
By Industry1,3 Sponsored vs. Non-sponsored1,4
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82% 5% 3% 10% Secured debt Unsecured debt Structured products and other Preferrred equity, common equity/interests and warrants
8% 92%
Fixed Rate Assets Floating Rate Assets
81% 19%
Sponsored Non-sponsored
18.4% 17.9% 11.3% 8.2% 8.0% 6.8% 3.8% 3.0% 3.0% 2.8% 16.8%
Business Services Aviation and Consumer Transport Healthcare & Pharmaceuticals Energy – Oil & Gas Transportation – Cargo, Distribution High Tech Industries Energy – Electricity Aerospace & Defense Telecommunications Chemicals, Plastics & Rubber Other
1 Core strategies include corporate lending, aviation, life sciences, asset based and lender finance. 2 Non-core strategies include oil & gas, structured credit, renewables, shipping and commodities. 3 The interest type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status. 4 The sponsored/non-sponsored percentages are calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities.
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($ in thousands) 4Q'18 3Q'18 2Q'18 1Q'18 4Q'17 Mar-18 Dec-17 Sep-17 Jun-17 Mar-17 Portfolio Composition, measured at fair value ($) First lien $1,131,942 $1,169,317 $1,142,148 $1,140,215 $1,049,232 Second lien 706,011 743,299 750,710 734,946 685,268 Total secured debt $1,837,953 $1,912,616 $1,892,857 $1,875,161 $1,734,500 Unsecured debt 103,166 107,678 107,558 162,028 161,385 Structured products and other 67,968 97,884 124,269 135,863 166,893 Preferred equity 31,053 25,690 25,780 25,754 25,637 Common equity/interests and warrants 207,908 208,694 209,826 217,772 228,293 Total investment portfolio $2,248,047 $2,352,562 $2,360,290 $2,416,579 $2,316,708 Portfolio Composition, measured at fair value (%) First lien 50% 50% 48% 47% 45% Second lien 31% 32% 32% 30% 30% Total secured debt 82% 81% 80% 78% 75% Unsecured debt 5% 5% 5% 7% 7% Structured products and other 3% 4% 5% 6% 7% Preferred equity 1% 1% 1% 1% 1% Common equity/interests and warrants 9% 9% 9% 9% 10% Portfolio Composition by Strategy, measured at fair value (%) Core strategies1 77% 74% 73% 74% 71% Non-core strategies2 19% 22% 23% 23% 24% Legacy & Other 4% 4% 4% 4% 5% Interest Rate Type, measured at fair value3 Fixed rate % 8% 8% 9% 14% 16% Floating rate % 92% 92% 91% 86% 84% Sponsored / Non-sponsored, measured at fair value4 Sponsored % 81% 82% 81% 83% 86% Non-sponsored % 19% 18% 19% 17% 14%
As of March 31, 2018, 3.3% of total investments at amortized cost, or 2.3% of total investments at fair value, were on non-accrual status.
1 Source: Company data. Includes all portfolio company investments except structured products, common equities, warrants and investments on non-accrual status. Also excludes select investments where debt-to- EBITDA is not a relevant or appropriate metric, or data is not available. Weighted average by cost.
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($ in thousands) 4Q'18 3Q'18 2Q'18 1Q'18 4Q'17 Mar-18 Dec-17 Sep-17 Jun-17 Mar-17 Investments on Non-Accrual Status Non-accrual investments at amortized cost $75,671 $57,928 $46,199 $46,430 $183,141 Non-accrual investments/total portfolio, at amortized cost 3.3% 2.4% 1.9% 1.9% 7.0% Non-accrual investments at fair value $51,426 $35,175 $30,204 $27,458 $68,571 Non-accrual investments/total portfolio, at fair value 2.3% 1.5% 1.3% 1.1% 3.0% Portfolio Company Credit Metrics1 Net Leverage (Close) 5.5 x 5.4 x 5.5 x 5.4 x 5.5 x Net Leverage (Current) 5.5 x 5.5 x 5.5 x 5.5 x 5.5 x Interest Coverage (Close) 2.5 x 2.7 x 2.7 x 2.7 x 2.5 x Interest Coverage (Current) 2.5 x 2.7 x 2.7 x 2.7 x 2.5 x Cost Fair Value Investments on Non-Accrual Status as of March 31, 2018 Elements Behavioral Health, Inc. $11,911 $0 Magnetation, LLC 1,273 451 Spotted Hawk 44,380 40,816 Sprint Industrial Holdings, LLC. 18,107 10,159 Total $75,671 $51,426 Healthcare & Pharmaceuticals Metals & Mining Industry Energy – Oil & Gas Containers, Packaging & Glass
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, 2018. Based on average debt
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Debt Facilities Debt Issued/ Amended Final Maturity Date Interest Rate Principal Amount Outstanding (in thousands) Senior Secured Facility ($1.19 billion) 12/22/2016 12/22/2021 L + 200 bps $285,216 Senior Secured Notes (Series B) 9/29/2011 9/29/2018 6.250% 16,000 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 5.250% 350,000 Weighted Average Annualized Interest Cost1 & Total Debt Obligations 5.225% 801,216 Deferred Financing Cost and Debt Discount (11,370) Total Debt Obligations,Net of Deferred Financing Cost and Debt Discount $789,846
Investment Portfolio1,2 Funding Sources3
1 On a fair value basis. 2 The interest type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual
for floating rate instruments) to our loan portfolio and outstanding debt as of March 31, 2018, assuming no changes in our investment and borrowing structure.
Floating Rate Asset Floor Net Investment Income Interest Rate Sensitivity4
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8% 92%
Fixed Rate Assets Floating Rate Assets 23% 13% 64% Fixed Rate Debt Floating Rate Debt Common Equity
($ in millions) Par or Cost % of Floating Rate Portfolio Interest Rate Floors No Floor $213 16% < 1.00% 100 7% 1.00% to 1.24% 1,001 74% 1.25% to 1.49% 30 2% 1.50% to 1.74% 13 1% > =1.75% 0% Total $1,358 100% Annual Net Investment Income (in millions) Annual Net Investment Income Per Share Basis Point Change Up 400 basis points $33.6 $0.1555 Up 300 basis points $25.2 $0.1166 Up 200 basis points $16.8 $0.0778 Up 100 basis points $8.4 $0.0389 Down 100 basis points ($8.4) ($0.0388)
For more information, please contact: Elizabeth Besen Investor Relations Manager Phone: (212) 822-0625 Email: ebesen@apollo.com Gregory W. Hunt Chief Financial Officer and Treasurer Phone: (212) 822-0655 Email: ghunt@apollo.com
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