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Apollo Investment Corp. Reports Operating Results (10-Q)

August 04, 2010 | About:
10qk

10qk

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Apollo Investment Corp. (AINV) filed Quarterly Report for the period ended 2010-06-30.

Apollo Investment Corp. has a market cap of $2.02 billion; its shares were traded at around $10.42 with a P/E ratio of 8.2 and P/S ratio of 5.9. The dividend yield of Apollo Investment Corp. stocks is 10.7%. Apollo Investment Corp. had an annual average earning growth of 19.9% over the past 5 years.AINV is in the portfolios of David Dreman of Dreman Value Management, David Williams of Columbia Value and Restructuring Fund, Chuck Royce of Royce& Associates, Murray Stahl of Horizon Asset Management.

Highlight of Business Operations:

During the three months ended June 30, 2010, we invested $221 million across 3 new and 8 existing portfolio companies, through a mix of primary and opportunistic secondary market purchases. This compares to investing $61 million in 4 existing portfolio companies for the three months ended June 30, 2009. Investments sold or prepaid during the three months ended June 30, 2010 totaled $114 million versus $70 million for the three months ended June 30, 2009.

At June 30, 2010, 61% or $1.6 billion of our income-bearing investment portfolio is fixed rate debt and 39% or $1.0 billion is floating rate debt, measured at fair value. On a cost basis, 63% or $1.8 billion of our income-bearing investment portfolio is fixed rate debt and 37% or $1.1 billion is floating rate debt. At June 30, 2009, 67% or $1.5 billion of our income-bearing investment portfolio was fixed rate debt and 33% or $0.7 billion was

Expenses totaled $37.4 million and $33.2 million, respectively, for the three months ended June 30, 2010 and June 30, 2009, of which $24.8 million and $25.1 million, respectively, were base management fees and performance-based incentive fees and $9.9 million and $5.1 million, respectively, were interest and other credit facility expenses. Of these expenses, general and administrative expenses totaled $2.8 million and $3.1 million, respectively, for the three months ended June 30, 2010 and 2009. Expenses consist of base investment advisory and management fees, insurance expenses, administrative services fees, legal fees, directors fees, audit and tax services expenses, and other general and administrative expenses. The increase in expenses from the June 2009 to the June 2010 quarter was primarily related to the increase in interest and other credit facility expenses due to the December 2009 amendment to our revolving credit facility.

The Company had investment sales and prepayments totaling $114 million and $70 million, respectively, for the three months ended June 30, 2010 and June 30, 2009. Net realized gains for the three months ended June 30, 2010 were $3.9 million. For the June 2009 quarter, net losses totaled $98.2 million. Net realized gains for the June 2010 quarter were primarily derived from foreign currencies. Net realized losses for the June 2009 quarter were primarily derived from selective exits of underperforming investments.

For the three months ended June 30, 2010, the Company had a net decrease in net assets resulting from operations of $84.3 million. For the three months ended June 30, 2009, the Company had a net increase in net assets resulting from operations of $84.5 million. For the three months ended June 30, 2010, loss per average share was $0.45. For the three months ended June 30, 2009, earnings per average share were $0.59.

We own all of the common member interests in AIC Credit Opportunity Fund LLC (AIC Holdco), which was formed for the purpose of holding various financed investments. Effective in June 2008, we invested $39,500 in a special purpose entity wholly owned by AIC Holdco, AIC (FDC) Holdings LLC (Apollo FDC), which was used to purchase a Junior Profit-Participating Note due 2013 in principal amount of $39,500 (the Junior Note) from Apollo I Trust (the Trust). The Trust also issued a Senior Floating Rate Note due 2013 (the Senior Note) to an unaffiliated third party (FDC Counterparty) in principal amount of $39,500 paying interest at Libor plus 1.50%, increasing over time to Libor plus 2.0%. The Trust used the aggregate $79,000 proceeds to acquire $100,000 face value of a senior subordinated loan of First Data Corporation (the FDC Reference Obligation) due 2016 and paying interest at 11.25% per year. The Junior Note generally entitles Apollo FDC to the net interest and other proceeds due under the FDC Reference Obligation after payment of interest due under the Senior Notes, as described above. In addition, Apollo FDC is entitled to 100% of any realized appreciation in the FDC Reference Obligation and, since the Senior Note is a non-recourse obligation, Apollo FDC is exposed up to the amount of equity used by AIC Holdco to fund the purchase of the Junior Note plus any additional margin Apollo decides to post, if any, during the term of the financing.

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