Apollo Investment Corporation (AINV)

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Apollo Investment Corporation (AINV)

Q4 2014 Earnings Conference Call

May 20, 2014 10:00 ET


Elizabeth Besen - Investor Relations Manager

Jim Zelter - CEO

Ted Goldthorpe - President

Greg Hunt - CFO, Treasurer


Troy Ward - KBW

Terry Ma - Barclays

Chris York - JMP Securities

Matt Howlett - UBS

Doug Mewhirter - SunTrust

Vernon Plack - BB&T Capital

Robert Dodd - Raymond James



Good morning and welcome to Apollo Investment Corporation's Earnings Conference Call for the period ending March 31, 2014. At this time all participants have been placed in a listen-only mode. The call will be opened for a question-and-answer session following the speakers' prepared remarks. (Operator Instructions)

I'd now turn the call over to Elizabeth Besen, Investor Relations Manager for Apollo Investment Corporation.

Elizabeth Besen

Thank you, operator, and thank you, everyone, for joining us today. With me today are Jim Zelter, Chief Executive Officer; Ted Goldthorpe, President and Chief Investment Officer; and Greg Hunt, Chief Financial Officer.

I'd like to advise everyone that today's call and webcast are being recorded. Please note that they are the property of Apollo Investment Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our earnings press release.

I'd also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking information. Today's conference call and webcast may include forward-looking statements. Forward-looking statements involve risks and uncertainties, including, but not limited to, statements as to our future results, our business prospects and the prospects of our portfolio of companies. You should refer to our registration statement and shareholder reports for risks that apply to our business and may adversely affect any forward-looking statements we make. We do not undertake to update our forward-looking statements or projections unless required by law. To obtain copies of our SEC filings, please visit our Web site at

I'd also like to remind everyone that we've posted a supplemental financial information package on our Web site, which contains information about the portfolio, as well as the company's financial performance.

At this time, I'd like to turn the call over to Jim Zelter.

Jim Zelter

Thank you, Elizabeth. This morning, we issued our earnings release and filed our Annual 10-K. I will begin my remarks with some highlights for the quarter and for the fiscal year. Following my brief remarks, Ted will provide an overview of the market environment and review our portfolio and investment activity. And finally, Greg will discuss our financial results in greater detail. We will then open the call to questions.

We are pleased to report strong results for the March quarter including solid earnings and increase in net asset value and a record level of asset deployment. Net investment income was $0.22 per share, which we believe reflects both the strength and diversity of our earnings model. Our net asset value was $8.67, an increase of 1.2% for the quarter and 4.8% for the year exhibiting the stability we seek to achieve.

Let me now take a step back and spend a few minutes reviewing the past year. While the broadly syndicated markets became increasingly competitive risk-adjusted returns in the middle market while not immune have generally remained attractive. Therefore, given the current landscape we pursued opportunities provided to us from our differentiated sourcing model maximizing the flexibility associated with our permanent capital.

For the year, we increased the size of our portfolio by 22% to $3.5 billion earned $0.91 of net investment income per share outpacing our dividend by 14%. Increase the portfolio's allocation to secure debt to 56% up from 44% a year ago and we continue to expand our specialty verticals by investing a total of 1.2 in oil and gas, aviation and structured products.

I'm very pleased that our investment team remained disciplined and continued to prudently underwrite capital structures despite the frothy market. We also continued to benefit significantly from the broader Apollo platform. The firm's scale and expertise across credit, private equity and real estate provide us with significant competitive advantages as well as investment opportunities and market insight.

In addition, on the funding side of the balance sheet, we improved our capital structure as we one, extended the term and reduced the funding cost on a revolving credit facility. Two, issued $150 million of long-term unsecured debt, and three, raise 286 million of common equity. All said we believe we are well-positioned for the year having derisked the portfolio with reduced issuer concentration, added more senior debt investments and improved our interest coverage and attachment points.

Our intention is to remain disciplined in our approach and favor investments with strong asset coverage over simple incremental yield. While the environment remains challenging, we are optimistic regarding the opportunities for providers of flexible capitals such as ourselves particularly as the new bank regulations reduce or somewhat eliminate lending by banks to certain segments of the credit market.

In March, the Board of Directors reapproved the investment advisory and management agreement under the same terms and with the same waivers as last year. Additionally, the Board approved a $0.20 dividend for shareholders as of record June 20, 2014.

With that summary, I will turn the call over to Ted to discuss the current market environment and our investment portfolio.

Ted Goldthorpe

Thank you, Jim. Beginning with the market environment, the non-investment grade credit markets strengthened during the quarter on proven economic data and reduced interest rate volatility. Strong fund inflows supported new issue activity and drove spreads tighter. This quarter end, the market has begun to differentiate between issuers with an increased focus on results. However, the primary CLO market has remained active loan fund flow has dwindled and have snapped to 95-week inflow streak.

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