AINV

Apollo Investment Corporation (AINV)

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Apollo Investment (AINV)

Q4 2011 Earnings Call

June 01, 2011 11:00 am ET

Executives

James Zelter - Chief Executive Officer and Director

Richard Peteka - Chief Financial Officer, Principal Accounting Officer and Treasurer

Patrick Dalton - President of Apollo Investment Corporation and Chief Operating Officer of Apollo Investment Corporation

Analysts

Jasper Burch - Macquarie Research

Vernon Plack - BB&T Capital Markets

Richard Shane - JP Morgan Chase & Co

Joel Houck

David Chiaverini - BMO Capital Markets U.S.

James Ballan - Lazard Capital Markets LLC

Steven Kwok - Keefe, Bruyette, & Woods, Inc.

Presentation

Operator

Good morning, and welcome to Apollo Investment Corporation's Fourth Quarter and Fiscal Year-End 2011 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the call over to Mr. Jim Zelter, Chief Executive Officer of Apollo Investment Corporation. Mr. Zelter, you may begin your conference.

James Zelter

Thank you, and good morning, everyone. I'm joined today by Patrick Dalton, Apollo Investment Corporation's President and COO; and Richard Peteka, our Chief Financial Officer. Rich, before we begin, would you start off by disclosing some general conference call information and include the comments about forward-looking statements?

Richard Peteka

Thank you, Jim. 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 and projections and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake to update our forward-looking statements or projections unless required by law.

To obtain copies of our latest SEC filings, please visit our website at www.apolloic.com or call us at (212) 515-3450. At this time, I'd like to turn the call back to our Chief Executive Officer, Jim Zelter.

James Zelter

Thank you, Rich. The credit markets continue to exhibit strength throughout the March 2011 quarter, maintaining strong liquidity and driving debt yields tighter as investors continued their search for extra yield amid continuing low interest rate environment. These dynamics drove solid demand for primary and secondary paper, prompting continued record high yield issuance with $80 billion issued during the first calendar quarter of 2011, only $3 billion off the all-time high record quarterly issuance from the December 2010 quarter. Even renewed fundamental concerns about inconsistent domestic economic data, and certain sovereign issuers appear to pale in comparison to the significant liquidity within the current capital markets in this period. Now let me summarize some brief portfolio highlights for the quarter ended March 31, 2011.

In total, we invested $298 million in 8 new and 11 existing portfolio companies. We also received prepayments totaling $173 million and sold select assets totaling $82 million. At March 31, 2011, our portfolio of investments totaled $3.05 billion, measured at fair market value and was represented by 69 distinct portfolio companies, diversified amongst 30 different industries. The weighted average yield on our overall debt portfolio was 11.6% as of March 31, 2011, versus 11.5% at December 31, 2010. During the fiscal year ended March 31, 2011, we invested in 21 new portfolio companies, totaling $1.1 billion and harvested or exited 19 portfolio companies totaling $977 million over the same period. Since the initial public offering of Apollo Investment Corporation in April 2004 and through March 11 -- March 31, 2011, invested capital has now totaled over $7.3 billion and 147 portfolio companies with more than 90 different financial sponsors.

As we noted in our last call, 1 of our strategic priorities was to introduce new investors to Apollo Investment Corporation. Long-term investors interested in providing us with their capital, capital which we seek to use for growth. We believe these investors should recognize our current diversified portfolio of corporate securities and loans and will be motivated to partner with us for further into this uneven economic recovery. In doing so, in January 2011 we were pleased to issue a $200 million senior unsecured 5-year convertible note with what we believe are attractive terms: a 5 3/4 coupon with a conversion premium of 17.5%. We also added in January another $50 million commitment to our senior secured revolving credit facility from our growing syndicate of revolving lenders. We expect the inaugural unsecured issuance to generate significant long-term benefits to AIC and its shareholders. Accordingly, we have deliberately accumulated capital resources as we look ahead and prepare for we may -- what we believe may be a long period of investment opportunity for Apollo Investment Corporation. Pro forma for April 2011 debt maturities, AIC now has approximately $625 million of cash available for new investment.

Rich, why don't you take them through some financial highlights for the quarter, please?

Richard Peteka

Certainly. I'll begin with some March 31, 2011 balance sheet highlights. As Jim noted earlier, our total investment portfolio had a fair market value of $3.05 billion. This is up from $2.92 billion at December 31, 2010. Our March 31 net assets totaled $1.96 billion. With a net asset value per share of $10.03. This compares to net asset total of $1.90 billion at December 31, 2010 and a net asset value per share of $9.73. The increase in NAV per share for the quarter was driven primarily by net unrealized appreciation on our investment portfolio. Positive contributors to performance for the quarter included our investments in AIC Credit Opportunity Fund, Alliance Boots and Sorenson Communications, among others. Partially offsetting the company's unrealized appreciation for the quarter, was unrealized depreciation from PlayPower Holdings, Angelica Corporation and MW Industries, among others.

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