Investor Presentation March 2019 Unless otherwise noted, - - 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 March 2019 Unless otherwise noted, information as of December 31, 2018 It should not be assumed that investments made in the future will be profitable or will equal
Unless otherwise noted, information as of December 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
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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 (“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 “Company”) is subject to certain significant risks relating to our business and investment objective. For more detailed information on risks relating to the Company, 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 the Company. Financial Data Financial data used in this presentation for the periods shown is from the Company’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 Company refers to fiscal periods. All share and per share data shown herein is adjusted for the one-for-three reverse stock split of the Company’s common stock which took effect at the close of business on November 30, 2018.
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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
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 December 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 March 8, 2019. 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
regulated investment company (“RIC”)
Externally Managed by Apollo Global Management
approximately $280 billion of AUM 2,4 with expertise in private equity, credit and real estate
Competitive Advantages Apollo Affiliation
benefits
team with joint front engine across AINV and MidCap Financial (“MidCap”) 5 Well Positioned to Benefit from Increase in Regulatory Leverage 6
assets from existing Apollo Direct Origination platform
commitments while maintaining relatively small hold sizes given AINV’s receipt of exemptive relief to co-invest 7 Exemptive Relief to Co-Invest 7
competitive positioning
Current Market Information 8 Market capitalization $1.07 billion Dividend yield at market price 9 11.7% Dividend yield at NAV 10 9.5%
New York Bethesda Houston Los Angeles London Madrid Frankfurt Luxembourg Delhi Mumbai Shanghai Hong Kong Singapore
Notes: AUM components may not sum due to rounding. See definition of AUM at beginning of presentation. 1 As of December 31, 2018.
Founded: 1990 AUM: $280 billion Employees: 1,143
Global Offices: 15
Global Footprint Credit $193bn AUM
investments
investments
(CMBS, CRE Loans)
Firm Profile1 Investment Approach
Value-Oriented Contrarian Integrated Investment Platform Opportunistic Across Market Cycles and Capital Structures Focus on 9 Core Industries
Business Segments
Private Equity $69bn AUM Real Assets $18bn AUM
7 San Diego Tokyo
Notes: AUM and headcount as of December 31, 2018. AUM figures rounded from second decimal point. See definition of AUM at beginning of presentation. AUM figures include funds that are denominated in Euros and translated into U.S. dollars at an exchange rate of €1.00 to $1.15 as of December 31, 2018. Headcounts exclude 29 business professionals / traders. Strategy AUM may not sum to total credit AUM due to rounding. 1 Global Illiquid Opportunistic Credit business reports jointly to Credit and Private Equity management. Athene Asset Management and Other Advised Assets represent non-credit assets that are sub-advised by Apollo.
Apollo Credit $193.2 Billion in AUM & 242 Investment Professionals
Global Liquid Credit $39.9 billion in AUM 41 Professionals Global Structured Finance $23.7 billion in AUM 33 Professionals Global Illiquid Opportunistic Credit1 $8.7 billion in AUM 23 Professionals Direct Origination $16.2 billion in AUM 35 Professionals European Principal Finance $7.1 billion in AUM 22 Professionals Athene Asset Management & Other Advised Assets $97.7 billion in AUM 59 Professionals
Strategies
distressed
estate
Flagship Vehicles
Efficient
Fund
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1 As of December 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) assistance with 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. 3 As of September 30, 2018.
Apollo Investment Corporation MidCap CION Investment Corporation 2
under the Investment Company Act of 1940 that has elected to be treated as a regulated investment company (RIC) for federal income tax purposes
solutions to US middle market companies
Market
103 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 federal income 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 Product Capabilities
Leveraged Lending
intermediaries
core investments
Niche Markets
$0.5 $2.1 $3.8 $0.2 $0.5 $1.1 $0.7 $2.6 $4.9 0% 5% 10% 15% 20% 25% 30% 35% $- $1 $2 $3 $4 $5 2016 2017 2018 Apollo Global Commitment, excluding AINV AINV Commitment
Apollo Global Management Co-Investment Volume 1
1 On March 29, 2016, the Company received an exemptive order from the SEC permitting greater flexibility to participate in co-investment transactions with certain of its affiliates where terms other than price and quantity are negotiated, subject to the conditions included therein.
Direct Origination platform
maintain relatively small hold sizes given AINV’s receipt of exemptive relief to co-invest in 2016 1
135+ Investment Professionals 60+ sourcing professionals 75+ underwriters
Volume Team
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$ in billions
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On a fair value basis, Percentages based on total investment portfolio As of December 31, 2016 As of December 31, 2017 As of December 31, 2018 Increased exposure to core assets1 66% 74% 80% Decreased exposure to non-core assets and legacy 2 34% 26% 20% Increased exposure to first lien debt as % of total investment portfolio 42% 50% 64% Increased exposure to floating rate debt 3 84% 92% 100% Focused on investments made pursuant to co-investment order 4 3% 19% 35% Decreased borrower concentration 5 $24.3 million $22.9 million $18.2 million
1 Core assets include corporate lending and aviation. Corporate lending portfolio includes leveraged lending, life sciences, asset based and lender finance. 2 Non-core strategies include oil & gas, structured credit, renewables, shipping, commodities and legacy assets. 3 The interest type information is calculated using the Company’s corporate lending portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status. 4 On March 29, 2016, the Company received an exemptive order from the SEC permitting greater flexibility to participate in co-investment transactions with certain of its affiliates where terms other than price and quantity are negotiated, subject to the conditions included therein. 5 Excludes Merx Aviation.
Non-Core and Legacy Assets ($ in millions)
$304 $161
$232 $58
$133 $154 $238 $13 $158 $84 $1,065 $469
Jun-16 Dec-18
Oil & Gas Renewables Shipping Structured Credit Legacy & Other
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1 Non-core strategies include oil & gas, structured credit, renewables, shipping, commodities and legacy assets. On a fair value basis.
Over the past 10 quarters, reduced exposure to non-core strategies by approximately $600 million 4
Key Elements of Our Plan 1
leveraged loans sourced by Apollo’s Direct Origination platform with the following characteristics: – Leverage range of 4.0x to 5.5x – Floating rate spreads ~500 to 700 basis points – ~ 1 to 1.5% position sizes
1 Subject to change at any notice.
On April 4, 2018, AINV’s Board approved the increase in allowable leverage as permitted under SBCAA which will go into effect on April 4, 2019
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We believe that the ability to increase our leverage provides a unique opportunity for AINV given the robust volume of senior floating rate assets already originated by the Apollo Direct Origination platform
` December 31, 2018 Revised Target Leverage and Portfolio Size AINV Debt-to-Equity Ratio 0.76x 1.25x – 1.40x Portfolio Size (in billions) $2.3 $3.2 - $3.4 Asset Mix (%) at fair value First Lien Corporate Loans 1 37 ~ 80-85 Second Lien Corporate Loans 23 < 10 Merx Aviation 20 ~10 – 15 Unsecured Corporate Loans Non-Core and Legacy 20 < 5 Other Key Metrics Weighted Average Spread 2 ~727 bps ~600 to 650 bps Weighted Average Net Leverage through AINV position 3 5.4x 4.2x Net Leverage Range of Incremental Assets n/a 4.0x – 5.5x Projected Loss Rate n/a 35-40 bps % of Total Portfolio Per Co-Investment Order 4 35% 70%-80%
Majority of incremental assets expected to be first lien floating rate loans with leverage of 4.0 ‒ 5.5x at L+500 ‒ 700 basis points
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1 Excludes Merx Aviation and non-core and legacy assets 2 For corporate lending portfolio. Corporate lending portfolio includes leveraged lending, life sciences, asset based and lender finance. 3 Source: Company data. Based on corporate lending portfolio. Excludes investments on non-accrual status. Current. Weighted by cost. 4 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.
Incremental leverage will come from increased usage of the revolving credit facility and, to the extent necessary, bilateral secured credit facilities
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December 31, 2018 Actual Revised Target Leverage and Portfolio Size AINV Debt-to-Equity Ratio 0.76x 1.25x – 1.40x Portfolio Size (in billions) $2.3 $3.2 - $3.4 Funding Structure ($ in billions) Senior Secured Revolving Credit Facility (drawn) $0.5 ~$1.3 1 Bilateral Secured Credit Facilities 0.0 Up to $0.2 Unsecured Term Debt 0.5 0.5 Total Debt Outstanding $ 1.0 $1.8 -$2.0 Stockholders’ Equity 1.3 1.4 Total Capital $2.3 $3.2 – $3.4 Capitalization (% Total Capital) Senior Secured Revolving Credit Facility 22% 39% 2 Bilateral Secured Credit Facilities 0% 0% - 5% Unsecured Term Debt 21% 15% 2 Stockholders’ Equity 57% 43% 2
1 Based on $1.59 billion facility. 2 Based on the mid-point of the leverage range.
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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 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 to 15%, subject to the 7% annualized performance threshold. 4 Since the inception of the share repurchase program and through December 31, 2018. Inclusive of commissions. 5 As of December 31, 2018.
Fee Structure Closely Aligns the Incentives of the Manager with the Interests of the Shareholders
gross assets to
Active Share Repurchase Program
$166.1 million 4
The combination of AINV’s new fee structure and active stock repurchase program demonstrate
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Portfolio by Strategy
19.7% 14.5% 13.3% 8.0% 7.1% 7.0% 3.3% 3.2% 3.1% 2.9% 17.9%
Aviation and Consumer Transport Business Services Healthcare & Pharmaceuticals High Tech Industries Transportation – Cargo, Distribution Energy – Oil & Gas Consumer Goods – Non-durable Diversified Investment Vehicles, Banking, Finance, Real Estate Chemicals, Plastics & Rubber Aerospace & Defense Other
Corporate Lending Portfolio Represents 60% Total Portfolio
Leveraged Lending 47% Life Sciences, Asset Based,and Lender Finance 13% Merx Aviation 20% Non-Core and Legacy 20%
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1 As of December 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 lending 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 lending portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities. 6 Current. 7 Source: Company data. Based on corporate lending portfolio. Excludes investments on non-accrual status. Current. Weighted by cost. 8 Other consists of: Beverage, Food & Tobacco; Consumer Services; Energy – Electricity; Advertising, Printing & Publishing; Consumer Goods – Durable; Automotive; Utilities – Electric; Food & Grocery; Manufacturing, Capital Equipment; Telecommunications; Containers, Packaging & Glass; Media – Diversified & Production; Hotel, Gaming, Leisure, Restaurants; and Metals & Mining. 9 Non-core strategies include oil & gas, structured credit, renewables, shipping, commodities and legacy assets. Investment Portfolio 2 $2.31bn # of Portfolio Companies 103 Weighted Average Yield 3 10.7% % Floating Rate 2,4 100% % Sponsored 2,5 83% Average Company Exposure (excluding Merx Aviation) 2 $18.2 mn Median Company Exposure 2 $14.4 mn Median EBITDA 6 $67 mn Net Leverage Through AINV Position 7 5.4 x Interest Coverage 6 2.3 x 1
Portfolio Key Statistics1 Portfolio by Industry1,2
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$1,383 60% $456 20% $469 20%
Corporate Lending Portfolio Merx Aviation Non-Core and Legacy
Total Investment Portfolio
(Corporate Lending, Merx, & Non-Core and Legacy)
First Lien 62% Second Lien 38%
exposure
through AINV position2 – 5.0x weighted average net leverage for first lien – 5.8x weighted average net leverage for second lien
– ~650 weighted average spread for first lien – ~855 weighted average spread for second lien
Metrics for Corporate Lending Portfolio Corporate Lending Portfolio
Notes: All data as of December 31, 2018. On a fair value basis. 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 Source: Company data. Based on corporate lending portfolio. Excludes investments on non-accrual status. Current. Weighted by cost.
$2.308 billion $1.383 billion
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$ in millions, unless indicated otherwise
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1 Based on corporate lending portfolio. Top ten portfolio companies based on market value as of December 31, 2018. 2. Excludes Merx Aviation.
Portfolio by Origination Strategy ($ in millions) Top Ten Corporate Lending Portfolio Companies1 ($ in millions) Average Position Size 2, at fair value ($ in millions) $22.9 $20.7 $21.0 $19.3 $18.2 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18
Fair Value % of Portfolio Leveraged Lending 1,077 $ 47% Life Sciences 116 5% Asset Based 136 6% Lender Finance 54 2% Total Corporate Lending Portfolio 1,383 $ 60% Aviation 456 20% Total Core Assets 1,839 80% Non-Core and Legacy 469 20% Total Portfolio 2,308 $ 100% Rank Portfolio Company Fair Value % of Portfolio 1 Genesis Healthcare, Inc. 59 $ 4.3% 2 PSI Services, LLC 42 3.1% 3 RA Outdoors, LLC (Active Outdoors) 40 2.9% 4 Aero Operating LLC 39 2.8% 5 Electro Rent Corporation 36 2.6% 6 Telestream Holdings Corporation 35 2.5% 7 ChyronHego Corporation 33 2.4% 8 FiscalNote 30 2.2% 9 Reddy Ice Corp. 30 2.2% 10 CT Technologies Intermediate Holdings, Inc 29 2.1% Top Ten Corporate Lending Portfolio Companies 374 $ 27.1% Other 1,009 72.9% Total Corporate Lending Portfolio 1,383 $ 100.0%
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Represents 19.7% of AINV’s investment portfolio 1, 2
95 aircraft 13 aircraft types 45 lessees in 26 countries Weighted average age of aircraft ~7.6 years Weighted average lease maturity ~5.1 years Merx Portfolio1 Number of Aircraft by Type1 Aircraft by Region1,3 Staggered Lease Maturity1 Aircraft Value by Lessee1,2 Revenue by Lessee1,4
34 29 9 6 5 22221 1 1 1
737-800 A320-200 A321-200 737-700 A319-100 A321neo E-170 E-190 E-195 737-900ER 777-200F 787-8 A330-200
36% 28% 20% 9% 3% 2% 2% Asia Europe North America Latin America Africa Australia Middle East 4 14 14 8 15 13 8 11 3 1 4
1 3 5 7 9 11 13 15 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 # of leases maturing by year 8% 8% 6% 5% 4% 4% 4% 4% 4% 3% 2% 2% 2% 2% 2% 2% 2% 2% 2% 30% 26 Lessees Each < 2%
7.9% 7.6% 7.5% 4.6% 4.5% 4.1% 4.0% 3.9% 3.8% 3.4% 3.1% 3.1% 3.0% 2.9% 2.5% 2.1% 2.0% 1.9% 1.8% 1.7% 1.6% 1.6% 1.6% 1.5% 1.4% 1.4% 1.4% 1.4% 1.3% 1.2% 1.1% 1.1% 0.9% 0.9% 0.8% 0.8% 0.8% 0.8% 0.7% 0.7% 0.6% 0.6% 0.4% 0.0% 0.0%
1 As of December 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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Source: Company data. Based on corporate lending portfolio. Excludes investments on non-accrual status.
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 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 At Close Current 0.00x 1.00x 2.00x 3.00x 4.00x 5.00x 6.00x 7.00x Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 At Close Current 0.00x 0.50x 1.00x 1.50x 2.00x 2.50x 3.00x 3.50x 4.00x Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 At Close Current
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Notes: Reflects the views of Apollo. 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 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 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.
1 Origination platform is highly differentiated versus other market participants 2 Uniquely positioned to benefit from increase in regulatory leverage 1 3 Receipt of exemptive relief to co-invest enhances competitive positioning 2 4 Plan for reduction in asset coverage requirement should deliver improved shareholder returns and provide significant investment capacity 5 Well-positioned to benefit from rising interest rates 6 Strong balance sheet and diverse funding sources 7 Fee structure closely aligns the incentives of the manager with the interests of shareholders 8 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
liquidation value
Lender Finance
underlying collateral
borrowers
assets, and corporate and/or personal recourse with various restrictive covenants
underlying collateral
asset class
Note: Per share and shares outstanding data have been adjusted for the 1-for-3 reverse stock split which was completed after market close on November 30, 2018. 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) 3Q'19 2Q'19 1Q'19 4Q'18 3Q'18 Dec-18 Sep-18 Jun-18 Mar-18 Dec-17 Operating Results1 Net investment income $31,487 $32,163 $31,547 $31,943 $33,966 Net realized and change in unrealized gains (losses) from investments and foreign currencies (32,665) (4,134) (18,297) (11,316) (22,342) Net realized loss on extinguishment of debt — — — — (5,790) Net increase (decrease) in net assets resulting from operations ($1,178) $28,029 $13,250 $20,627 $5,834 Net investment income per share $0.45 $0.45 $0.44 $0.44 $0.47 Net realized and change in unrealized gains (losses) from investments and foreign currencies p/s ($0.47) ($0.06) ($0.25) ($0.16) ($0.31) Net realized loss on extinguishment of debt per share — — — — ($0.08) Earnings (loss) per share ($0.02) $0.39 $0.18 $0.29 $0.08 Distribution recorded per common share $0.45 $0.45 $0.45 $0.45 $0.45 Select Balance Sheet and Other Data Investment portfolio (at fair value) $2,307,966 $2,324,741 $2,495,459 $2,248,047 $2,352,562 Debt outstanding $994,487 $946,236 $1,102,679 $789,846 $875,165 Net assets $1,316,605 $1,371,152 $1,391,166 $1,418,086 $1,441,050 Net asset value per share $19.03 $19.40 $19.42 $19.67 $19.81 Debt-to-equity ratio 0.76 x 0.69 x 0.79 x 0.56 x 0.61 x Net leverage ratio2 0.74 x 0.68 x 0.78 x 0.57 x 0.62 x Weighted average shares outstanding 70,105,587 71,366,492 71,971,572 72,233,517 72,850,060 Shares outstanding 69,187,804 70,685,665 71,641,765 72,104,032 72,751,985 Number of portfolio companies, at period end 103 98 96 90 86 Weighted Average Yields, at period end First lien3 10.4% 10.4% 10.4% 10.5% 10.3% Second lien3 11.4% 11.2% 11.1% 10.9% 10.8% Total secured debt3 10.7% 10.7% 10.7% 10.7% 10.5% Unsecured debt3 N/A 11.0% 11.4% 11.3% 11.2% Total debt portfolio3 10.7% 10.7% 10.7% 10.7% 10.5% Total portfolio4 9.6% 9.7% 9.7% 9.6% 9.6%
1 Numbers may not sum due to rounding. 2 Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status.
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($ in thousands) 3Q'19 2Q'19 1Q'19 4Q'18 3Q'18 Dec-18 Sep-18 Jun-18 Mar-18 Dec-17 Portfolio Activity1 Investments made $305,328 $363,565 $358,950 $243,329 $198,355 Investments sold (16,317) (163,249) (14,832) (119,302) (48,084) Net investment activity before repayments $289,011 $200,316 $344,117 $124,027 $150,271 Investments repaid (274,371) (372,056) (93,786) (238,131) (156,716) Net investment activity $14,640 ($171,740) $250,331 ($114,104) ($6,445) Number of portfolio companies, at beginning of period 98 96 90 86 87 Number of new portfolio companies 14 9 7 8 8 Number of exited portfolio companies (9) (7) (1) (4) (9) Number of portfolio companies, at period end 103 98 96 90 86 Number of investments in existing portfolio companies 26 16 20 19 12 Yield on Activity2 Yield on investments made 9.3% 9.5% 9.4% 9.7% 9.9% Yield on debt sales and repayments 10.4% 10.1% 9.4% 9.6% 10.2%
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1 Weighted average yield on total debt portfolio on a cost basis at period end, exclusive of investments on non-accrual status. 2 Change in terms on investments may impact the weighted average yield of the total debt portfolio but are not reflected in new, sold or repaid investments. 3 Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status.
Investment Activity ($ in millions) Total Debt Portfolio Yield1,2 Net Investment Activity ($ in millions) Yield on Investment Activity2,3
$198 $243 $359 $364 $305 ($48) ($119) ($15) ($163) ($16) ($157) ($238) ($94) ($372) ($274) Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 New Investments Sales Repayments ($6) ($114) $250 ($172) $15 Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 10.5% 10.7% 10.7% 10.7% 10.7% Dec-17 Mar-18 Jun-18 Sep-18 Dec-18
9.9% 9.7% 9.4% 9.5% 9.3% 10.2% 7.6% 11.2% 10.1% 10.2% 10.8% 9.1% 10.1% 10.4% Dec-17 Mar-18 Jun-18 Sep-18 Dec-18 New Investments Sales Repayments
1 Numbers may not sum due to rounding. 2 First lien purchases include revolver drawdowns; first lien sales and repayments includes revolver repayments. 3 Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status.
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($ in thousands) 3Q'19 2Q'19 1Q'19 4Q'18 3Q'18 Dec-18 Sep-18 Jun-18 Mar-18 Dec-17 Purchases1 First lien2 $293,220 $351,623 $319,224 $186,265 $108,008 Second lien 11,102 9,339 39,323 49,426 89,544 Total secured debt 304,322 360,962 358,547 235,691 197,552 Unsecured debt — — — — — Structured products and other 38 47 43 47 — Preferred equity — 1,500 — 333 — Common equity/interests and warrants 968 1,056 360 7,258 803 Total Purchases $305,328 $363,565 $358,950 $243,329 $198,355 Yield at Cost on Debt Purchases3 First lien 9.3% 9.5% 9.3% 9.5% 9.3% Second lien 9.8% 11.0% 10.4% 10.3% 10.7% Total secured debt 9.3% 9.5% 9.4% 9.7% 9.9% Unsecured debt N/A N/A N/A N/A N/A Preferred equity N/A N/A N/A N/A N/A Yield at Cost on Debt Purchases 9.3% 9.5% 9.4% 9.7% 9.9% Sales and Repayments1 First lien2 $114,143 $400,720 $93,006 $228,989 $79,659 Second lien 79,389 119,450 8,728 91,255 90,981 Total secured debt 193,531 520,170 101,735 320,243 170,639 Unsecured debt 80,000 10,681 2,453 2,060 55 Structured products and other 11,894 129 92 27,349 27,292 Preferred equity — — (30) — — Common equity/interests and warrants 5,262 4,326 4,369 7,780 6,814 Total Sales and Repayments $290,688 $535,305 $108,618 $357,433 $204,800 Yield at Cost on Debt Sales and Repayments3 First lien 9.3% 9.6% 9.3% 9.0% 10.0% Second lien 11.2% 11.3% 10.0% 11.2% 10.5% Total secured debt 10.1% 10.0% 9.3% 9.6% 10.2% Unsecured debt 11.0% 15.0% 10.8% 10.2% 13.0% Preferred equity N/A N/A N/A N/A N/A Yield at Cost on Debt Sales and Repayments 10.4% 10.1% 9.4% 9.6% 10.2% Yield at Cost on Sales N/A 10.1% 11.2% 7.6% 10.2% Yield at Cost on Debt Repayments 10.4% 10.1% 9.1% 10.8% 10.2%
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Note: Numbers may not sum due to rounding.
($ in thousands) 3Q'19 2Q'19 1Q'19 4Q'18 3Q'18 Dec-18 Sep-18 Jun-18 Mar-18 Dec-17 Funded Investment Activity, excluding Merx Aviation and Revolvers Gross Fundings $220,602 $265,874 $199,714 $157,985 $165,066 Sales and Syndications ($16,317) ($154,776) ($14,832) ($119,302) ($48,084) Repayments ($196,774) ($248,107) ($13,464) ($157,061) ($119,070) Net Funded Investment Activity, excluding Merx Aviation and Revolvers $7,510 ($137,008) $171,418 ($118,378) ($2,087) Merx Aviation Gross Fundings 1,000 — $91,000 $18,500 $5,800 Repayments (2,350) (47,250)
($26,000) Net Funded Investment Activity, Merx Aviation (1,350) ($47,250) $91,000 ($6,500) ($20,200) Revolvers, excluding Merx Aviation Gross Fundings $83,726 $97,691 $68,236 $66,844 $27,489 Sales and Syndications — ($8,473) — — — Repayments ($75,246) ($76,700) ($80,322) ($56,070) ($11,646) Net Funded Investment Activity, Revolvers $8,479 $12,518 ($12,086) $10,774 $15,843 Total Funded Investment Activity Gross Fundings $305,328 $363,565 $358,950 $243,329 $198,355 Sales and Syndications ($16,317) ($163,249) ($14,832) ($119,302) ($48,084) Repayments ($274,371) ($372,056) ($93,786) ($238,131) ($156,716) Net Funded Investment Activity $14,640 ($171,740) $250,331 ($114,104) ($6,445)
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Note: Numbers may not sum due to rounding.
($ in thousands) 3Q'19 2Q'19 1Q'19 4Q'18 3Q'18 Dec-18 Sep-18 Jun-18 Mar-18 Dec-17 Commitments Gross Commitments Made $278,276 $224,569 $300,807 $234,301 $183,300 Exit of Commitments (225,625) (286,133) (81,586) (290,065) (172,435) Net Commitments Made $52,652 ($61,563) $219,221 ($55,764) $10,865 Gross Commitments Made Information Number of Portfolio Companies 19 13 14 11 10 Average Commitment Size $14,646 $17,275 $21,486 $21,300 $18,330 Weighted Average Spread over LIBOR of New First Lien Floating Rate Commitments (in bps) 599 639 617 697 699 Weighted Average Spread over LIBOR of New Second Lien Floating Rate Commitments (in bps) 734 900 787 809 803 Weighted Average Interest Rate of New First Lien Fixed Rate Commitments (in bps) N/A N/A N/A 1,200 N/A Weighted Average Interest Rate of New Second Lien Fixed Rate Commitments (in bps) N/A N/A N/A N/A N/A Gross Commitments Made by Asset Class First lien $266,090 $219,869 $247,391 $178,583 $92,209 Second lien 11,583 4,441 53,415 55,600 91,075 Unsecured debt — — — — — Structured products and other — — — — — Preferred equity — 260 — 56 — Common equity/interests and warrants 603 — — 63 16 Gross Commitments Made $278,276 $224,569 $300,807 $234,301 $183,300 Exit of Commitments by Asset Class First lien ($35,252) ($159,071) ($40,858) ($172,675) ($45,339) Second lien (94,221) (114,918) (27,987) (88,257) (91,023) Unsecured debt (80,000) (10,681) (12,741) (2,000) (52) Structured products and other (11,619) — — (27,130) (34,378) Preferred equity — — — — — Common equity/interests and warrants (4,533) (1,463) — (3) (1,643) Exit of Commitments ($225,625) ($286,133) ($81,586) ($290,065) ($172,435)
($ in thousands, except per share data) 3Q'19 2Q'19 1Q'19 4Q'18 3Q'18 Dec-18 Sep-18 Jun-18 Mar-18 Dec-17 Per Share NAV, beginning of period $19.40 $19.42 $19.67 $19.81 $20.17 Net investment income 0.45 0.45 0.44 0.44 0.47 Net realized and change in unrealized gain (loss) (0.47) (0.06) (0.25) (0.16) (0.31) Net realized loss on extinguishment of debt per share – – – – (0.08) Net increase (decrease) in net assets resulting from operations (0.02) 0.39 0.18 0.29 0.08 Repurchase of common stock 0.10 0.03 0.02 0.02 0.01 Distribution recorded (0.45) (0.45) (0.45) (0.45) (0.45) NAV, end of period $19.03 $19.40 $19.42 $19.67 $19.81 Total NAV, beginning of period $1,371,152 $1,391,166 $1,418,086 $1,441,050 $1,472,600 Net investment income 31,487 32,163 31,547 31,943 33,966 Net realized and change in unrealized gains (losses) (32,665) (4,134) (18,297) (11,316) (22,342) Net realized loss on extinguishment of debt – – – – (5,790) Net increase (decrease) in net assets resulting from operations (1,178) 28,029 13,250 20,627 5,834 Repurchase of common stock (22,067) (16,105) (7,877) (11,145) (4,645) Distributions recorded (31,302) (31,938) (32,293) (32,447) (32,738) NAV, end of period $1,316,605 $1,371,152 $1,391,166 $1,418,086 $1,441,050
$19.03 $19.40 $19.42 $19.67 $19.81 Dec-18 Sep-18 Jun-18 Mar-18 Dec-17
Note: Numbers may not sum due to rounding.
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Net Asset Value Per Share
19.7% 14.5% 13.3% 8.0% 7.1% 7.0% 3.3% 3.2% 3.1% 2.9% 17.9%
Aviation and Consumer Transport Business Services Healthcare & Pharmaceuticals High Tech Industries Transportation – Cargo, Distribution Energy – Oil & Gas Consumer Goods – Non-durable Diversified Investment Vehicles, Banking, Finance, Real Estate Chemicals, Plastics & Rubber Aerospace & Defense Other
By Asset Class1 Fixed Rate vs. Floating Rate1,2
Note: Numbers may not sum due to rounding. 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 status. 3 Other consists of: Beverage, Food & Tobacco; Consumer Services; Energy – Electricity; Advertising, Printing & Publishing; Consumer Goods – Durable; Automotive; Utilities – Electric; Food & Grocery; Manufacturing, Capital Equipment; Telecommunications; Containers, Packaging & Glass; Media – Diversified & Production; Hotel, Gaming, Leisure, Restaurants; and Metals & Mining.
By Industry1,3 Sponsored vs. Non-sponsored1,4
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83% 17%
Sponsored Non-sponsored
100%
Floating Rate Assets 64% 24% 3% 9% First lien debt Second lien debt Structured products and
Preferrred equity, common equity/interests and warrants
Note: Numbers may not sum due to rounding. 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
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. 5 The co-investment percentages are calculated using the Company’s total investment portfolio. 6 Excludes Merx Aviation.
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($ in thousands) 3Q'19 2Q'19 1Q'19 4Q'18 3Q'18 Dec-18 Sep-18 Jun-18 Mar-18 Dec-17 Portfolio Composition, measured at fair value ($) First lien $1,479,173 $1,313,114 $1,363,867 $1,131,942 $1,169,317 Second lien 558,853 631,551 737,124 706,011 743,299 Total secured debt $2,038,025 $1,944,665 $2,100,991 $1,837,953 $1,912,616 Unsecured debt — 80,000 90,599 103,166 107,678 Structured products and other 56,605 67,131 67,373 67,968 97,884 Preferred equity 27,772 32,524 31,401 31,053 25,690 Common equity/interests and warrants 185,564 200,421 205,095 207,908 208,694 Total investment portfolio $2,307,966 $2,324,741 $2,495,459 $2,248,047 $2,352,562 Portfolio Composition, measured at fair value (%) First lien 64% 57% 55% 50% 50% Second lien 24% 27% 30% 31% 32% Total secured debt 88% 84% 84% 82% 81% Unsecured debt 0% 3% 4% 5% 5% Structured products and other 3% 3% 3% 3% 4% Preferred equity 1% 1% 1% 1% 1% Common equity/interests and warrants 8% 9% 8% 9% 9% Portfolio Composition by Strategy, measured at fair value (%) Core strategies1 80% 78% 80% 77% 74% Non-core strategies2 17% 18% 17% 19% 22% Legacy & Other 4% 3% 3% 4% 4% Interest Rate Type, measured at fair value3 Fixed rate % 0% 6% 6% 8% 8% Floating rate % 100% 94% 94% 92% 92% Sponsored / Non-sponsored, measured at fair value4 Sponsored % 83% 82% 81% 81% 82% Non-sponsored % 17% 18% 19% 19% 18% Co-Investment, measured at fair value Co-investment $ $811,450 $685,609 $607,941 $498,704 $445,160 Co-investment % 5 35% 29% 24% 22% 19% Average investment size, measured at fair value 6 Average Investment $ $18,161 $19,256 $20,975 $20,740 $22,886
As of December 31, 2018, 3.4% of total investments at amortized cost, or 2.8% of total investments at fair value, were on non-accrual status.
Note: Numbers may not sum due to rounding. 1 Source: Company data. Includes all portfolio company investments except structured products, common equities, warrants and investments on non-accrual status. Also excludes select investments where debt-to-EBITDA is not a relevant or appropriate metric, or data is not available. Weighted average by cost.
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($ in thousands) 3Q'19 2Q'19 1Q'19 4Q'18 3Q'18 Dec-18 Sep-18 Jun-18 Mar-18 Dec-17 Investments on Non-Accrual Status Non-accrual investments at amortized cost $79,771 $75,671 $75,671 $75,671 $57,928 Non-accrual investments/total portfolio, at amortized cost 3.4% 3.2% 3.0% 3.3% 2.4% Non-accrual investments at fair value $63,754 $61,580 $57,646 $51,426 $35,175 Non-accrual investments/total portfolio, at fair value 2.8% 2.6% 2.3% 2.3% 1.5% Portfolio Company Credit Metrics1 Net Leverage (Close) 5.4 x 5.4 x 5.5 x 5.5 x 5.4 x Net Leverage (Current) 5.5 x 5.5 x 5.6 x 5.5 x 5.5 x Interest Coverage (Close) 2.4 x 2.4 x 2.4 x 2.5 x 2.7 x Interest Coverage (Current) 2.3 x 2.3 x 2.3 x 2.5 x 2.7 x Industry Cost Fair Value Investments on Non-Accrual Status as of December 31, 2018 Magnetation, LLC $1,182 $157 Spotted Hawk $44,380 $39,309 Sprint Industrial Holdings, LLC. $18,107 $14,560 Crowne Automotive $16,102 $9,730 Total $79,771 $63,754 Metals & Mining Energy – Oil & Gas Containers, Packaging & Glass Automotive
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 December 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 ($1.59 billion) 11/19/2018 11/19/2023 L + 200 bps $504,979 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 5.392% 1,004,979 Deferred Financing Cost and Debt Discount (10,492) Total Debt Obligations,Net of Deferred Financing Cost and Debt Discount $994,487
Investment Portfolio1,2 Funding Sources3
Note: Numbers may not sum due to rounding. 1 On a fair value basis. 2 The interest type information is calculated using the Company’s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status. 3 Based on total debt obligations before deferred financing cost and debt discount. 4 The table shows the estimated annual impact on net investment income of base rate changes in interest rates (considering interest rate floors for floating rate instruments) to our loan portfolio and outstanding debt as of December 31, 2018, assuming no changes in our investment and borrowing structure.
Floating Rate Asset Floor Net Investment Income Interest Rate Sensitivity4
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($ in millions) Par or Cost % of Floating Rate Portfolio Interest Rate Floors No Floor $295 20% < 1.00% 104 7% 1.00% to 1.24% 1,058 70% 1.25% to 1.49% 27 2% 1.50% to 1.74% 25 2% > =1.75% 0% Total $1,508 100% Annual Net Investment Income (in millions) Annual Net Investment Income Per Share Basis Point Change Up 400 basis points $26.8 $0.387 Up 300 basis points $20.1 $0.291 Up 200 basis points $13.4 $0.194 Up 100 basis points $6.7 $0.097 Down 100 basis points ($6.9) ($0.100)
21% 22% 57% Fixed Rate Debt Floating Rate Debt Common Equity
100%
Floating Rate Assets
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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