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Apollo Investment Corporation F1Q11 (Qtr End 06/30/10) Earnings Call Transcript

Apollo Investment Corporation F1Q11 (Qtr End 06/30/10) Earnings Call Transcript

Apollo Investment Corporation (AINV)

F1Q11 (Qtr End 06/30/10) Earnings Call Transcript

August 5, 2010 11:00 am ET

Executives

TST Recommends

Jim Zelter – CEO

Richard Peteka – CFO and Treasurer

Patrick Dalton – President and COO

Analysts

Sanjay Sakhrani – KBW

Faye Elliott – Bank of America

Vernon Plack – BB&T Capital Markets

John Stilmar – Suntrust

Troy Ward – Stifel Nicolaus

Jasper Birch – Macquarie Holdings

Robert Fether [ph] – RIS Investments [ph]

Presentation

Operator

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Good morning and welcome to the Apollo Investment Corporation Earnings Conference Call for our First Fiscal Quarter Ended June 30, 2010. At this time, all participants have been placed on listen-only mode. The call will be open for question-and-answer session following the speaker’s remark. (Operator Instructions)

It is now my pleasure to turn the call over to Jim Zelter, Chief Executive Officer of Apollo Investment Corporation. Mr. Zelter, you may begin your conference.

Jim Zelter

Thank you and good morning to everyone. I'm joined today by Patrick Dalton, Apollo Investment Corporation's President and Chief Operating Officer 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 remind 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.

Jim Zelter

Thank you, Rich. Early in the quarter we saw continued strength in the capital markets with strong high yield issuance and active industrial demand. However, in may and through the end of the quarter the markets become more volatile and ultimately ended weaker as industrials had highly concerns over solvent risk in Europe and the overall global economic recovery.

In addition, there were several reports that inconsistent economic data that kept many investors on the side lines, as they continue to access the potential contingent of perceived issues that are rose out of solvent debt crisis in Europe. These concerns among other will also grow high yield credit spreads wider during the quarter by approximately 70 basis points, among reasonable steady two way trading.

High yield issuance for the quarter ultimately remains strong totaling $44 billion as compared to the record $69 billion for the quarter ended March 2010. As we’ve said we believe that periods of increase volatility present windows of opportunity for our company, as volatility provides greater potential uncertainty, undeal execution and pricing for larger companies that seek the issue high yield debt.

Accordingly and as evidence by our commitment on the altegrity flow transaction, financial sponsor’s plays additional value on stability and uncertainty of the mezzanine market place, especially from capital provider’s that scale who can be relevant solution like a Apollo Investment Corporation.

Currently there’s an active debate in the overall market place on the stated economy. One group of industrial is position for double dip as they expect to decline in economy activity. The other group grounds their view on a recent earnings season that has surpassed expectation. Irrespective of our debate, we continue to find interesting risk reward investment opportunities.

Now, let me briefly go over some portfolio highlights. During the quarter we were active investors. In total we invested $221 million in three new and eight existing portfolio companies for the quarter. We also received prepayments and sold select assets totaling a $114 million.

Accordingly, our net investment growth for the quarter, totaled $107 million, at June 30, our portfolio of investments totaled $2.85 billion, measured its fair market value and was represented by 68 distinct portfolio companies, diversified among 31 industries.

At this time, I’d like to remind everyone that what we have told industrial repeatedly going back to our IPO in 2004. We are long term investors that invest selectively in long term assets, seeking superior risk adjusted returns overtime. We do not view ourselves as a specialty finance company and therefore, do not approach our investment operations as a quarterly business with quarterly goals and budgets.

Accordingly, we do not provide quarterly guidance on our growth or net portfolio growth or how the timing of such net growth may impact quarterly results. That said, we do believe that our results are more representative, if viewed and at least are rolling for quarter basis and our business strategy remains the same, as we laid out at the time of our IPO.

As a reminder, we were able; we are please to further grow our company’s capital base during the June quarter, by closing on our most recent equity market issuance in May, raising approximately $204 million of additional capital at a premium that was accretive to book value.

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