102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Description of Company and Products or Services:
Apollo Investment Corporation (NASDAQ: AINV) is a closed-end investment company
that has elected to be treated as a business development company under the Investment Company
Act of 1940. The Company invests primarily in various forms of debt investments, including
secured and unsecured debt, loan investments, and/or equity in private middle-market
companies. The Company may also invest in the securities of public companies and structured
products and other investments such as collateralized loan obligations and credit-linked notes.
The Company seeks to provide private financing solutions for private companies that do not have
access to the more traditional providers of credit. Apollo Investment Corporation is managed by
Apollo Investment Management, L.P., an affiliate of Apollo Global Management, LLC, a leading
global alternative investment manager. Their portfolios are also made up of equity interests such as
common stock, preferred stock, warrants or options. They may also be comprised of other investment
instruments that include foreign securities and structured products. As of March 31, 2016 the investments
consisted of 89 portfolio companies with 65% invested in secured debt, 9% in unsecured debt, 11% in
structured products, 3% in preferred equity, and 12% in common equity/interests and warrants measured
at fair value. Since AINV’s initial public offering the company has total invested capital of $16.4 billion
in 371 portfolio companies. AINV has also completed transactions with more than 100 different financial
sponsors since the company’s IPO in 2004. All investment decisions are overseen by Apollo Investment
Management and supervised by AINV’s board of directors. The board is comprised of individuals who
are independent of Apollo Global Management and their affiliates.
Culture:
AINV’s principal focus is to provide capital to middle-market companies in a variety of
industries seeking to target companies that generate free cash flows or that may support debt
investments with strong asset coverage. AINV may also provide debtor-in –possession or reserve
financing to companies. Additionally, they acquire investments in the secondary market if they
believe the risk-adjusted returns are attractive. AINV’s investment professionals should seek to
provide investors with attractive returns while minimizing the risk of capital loss throughout
economic cycles. Apollo Investment Management L.P., an affiliate of Apollo Global
Management, is AINV’s investment advisor that oversees board of directors’ decision making on
day to day bases.
Apollo Investment Corporation
(NASDAQ: AINV)
9 West 57th Street
New York, NY 10019
Prepared by Ryan Emmons
May 19, 2016
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Management Team
Manager Position/Background Start Date
James C. Zelter
(CEO)
Mr. Zelter joined Apollo in 2006. He became the Chief Executive Officer and a
Director of Apollo Investment Corporation in November 2008. He is the Managing
Partner of Apollo Capital Management (“ACM”). The funds in the ACM platform
include: Apollo Strategic Value Fund, Apollo Credit Opportunity Fund I and II,
Apollo Asia Opportunity Fund and Apollo European Principal Finance Fund.
ACM also includes Apollo Investment Management, L.P. the investment manager
to Apollo Investment Corporation. Prior to joining Apollo, Mr. Zelter was with
Citigroup and its predecessor companies from 1994 to 2006. From 2003 to 2005,
Mr. Zelter was Chief Investment Officer of Citigroup Alternative Investments, and
prior to that he was responsible for the firm’s Global High Yield franchise.
2006
Howard Widra
Appointed
President
6/6/2016
Mr. Widra has been with Apollo Global Management, LLC and/or its
affiliates since 2013, most recently serving as Co-Head of Direct
Origination. Mr. Widra is a co-founder of MidCap Financial, a $6 billion
specialty finance business, and was formerly its Chief Executive Officer.
Prior to MidCap, Mr. Widra was the founder and President of Merrill Lynch
Capital Healthcare Finance. Prior to Merrill Lynch, Mr. Widra was
President of GE Capital Healthcare Commercial Finance and held senior
roles in its predecessor entities including President of Heller Healthcare
Finance, and COO of Healthcare Financial Partners. Mr. Widra holds a J.D.,
Cum Laude, from the Harvard Law School and a B.A. in Economics from
the University of Michigan.
2016
Gregory W. Hunt
(Chief Financial
Officer and
Treasurer)
Mr. Hunt began his term as Chief Financial Officer and Treasurer of Apollo
Investment Corporation in May 2012. Previously, Mr. Hunt was Executive Vice
President and Chief Financial Officer for Yankee Candle which he joined in April
2010. Prior to joining Yankee Candle, Mr. Hunt served as the Executive Vice
President of Strategic and Commercial Development for Norwegian Cruise Lines
from 2007 to 2009. Prior to joining Norwegian Cruise Lines, Mr. Hunt served as
Chief Financial Officer and Chief Restructuring Officer of Tweeter Home
Entertainment Group, Inc. from 2006 to 2007 and Chief Financial Officer and Co-
Chief Executive of Syratech Corporation from 2001 to 2006. Prior to Syratech, Mr.
Hunt held several senior financial leadership positions including Chief Financial
Officer of NRT Inc., Culligan Water Technologies, Inc. and Samsonite
Corporation. Mr. Hunt also serves as a Director of LogicSource, Inc. and as a
member of the Board of Advisors for the University of Vermont School of
Business. Mr. Hunt earned a bachelor's degree in accounting and finance from the
University of Vermont and is a Certified Public Accountant.
2012
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Cindy Z. Michel
(Vice President
and Chief
Compliance
officer)
Ms. Michel was appointed Chief Compliance Officer and Vice President of Apollo
Investment Corporation in 2010. Ms. Michel joined Apollo Global Management,
LLC in 2007 as its Director of Compliance was named Chief Compliance Officer
in 2014. Prior to joining Apollo, Ms. Michel served as the Director of Compliance
of the Private Equity Division at Lehman Brothers. Prior to that, she was
associated with the investment bank Credit-Suisse Securities as a member of its
Compliance Department supporting the Private Equity and Investment Banking
businesses. Before joining Credit-Suisse, Ms. Michel was associated with the law
firm of DLA Piper.
2007
Joseph d. Glatt
(Chief Legal
Officer, Secretary
and Vice
President)
Mr. Glatt was appointed Chief Legal Officer of the Company in 2014, Secretary
in 2010 and Vice President in 2009. Mr. Glatt is also currently General Counsel
of ACM, a position he has held since 2007. Since 2011 he has served as the Chief
Legal Officer of Apollo Senior Floating Rate Fund Inc., and since 2013 he has
served as the Chief Legal Officer of Apollo Tactical Income Fund Inc.
Previously, Mr. Glatt was associated with the law firms of Simpson Thacher &
Bartlett LLP from 1998 to 2003 and Schulte Roth & Zabel LLP from 2003 to
2007, in each case, primarily focusing on mergers and acquisitions, leveraged
buyouts and capital markets activities.
2007
Fund Managers
Managers
Name
Fund(s) They Currently Manage
James C. Zelter
He is the Managing Partner of Apollo Capital Management (“ACM”). The funds in the ACM
platform include: Apollo Strategic Value Fund, Apollo Credit Opportunity Fund I and II, Apollo
Asia Opportunity Fund and Apollo European Principal Finance Fund. ACM also includes Apollo
Investment Management, L.P. the investment manager to Apollo Investment Corporation.
Who is the typical shareholder? Both Retail and Institutional
Institutional Holdings: 40.83%
Total Number of Holders: 228
Total Shares Held: 92,328,607
Total Value of Holdings: 481,032,042
Net Activity (5,997,063)
Market capitalization of company:
$1.16 Billion
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Historical Financials
Selected Financial Data
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Cash Flows
In Millions of USD (except for per
share items)
12 months ending
2016-03-31
12 months ending
2015-03-31
12 months ending 2014-
03-31
12 months ending
2013-03-31
Net Income/Revenues -44.53 75.42 270.87 104.47
Non-Cash Items 201.46 118.66 -122.47 29.08
Changes in Working Capital 279.26 -152.06 -441.18 -153.48
Cash from Operating Activities 436.19 42.02 -292.78 -19.93
Financing Cash Flow Items -5.88 -3.83 -12.79 -18.57
Total Cash Dividends Paid -187.18 -189.39 -175.42 -161.14
Issuance (Retirement) of Stock, Net -62.44 0.00 286.55 50.00
Issuance (Retirement) of Debt, Net -170.45 145.11 202.96 153.16
Cash from Financing Activities -425.94 -48.12 301.30 23.45
Foreign Exchange Effects 0.23 -0.22 0.02 0.00
Net Change in Cash 10.49 -6.32 8.54 3.52
Cash Interest Paid, Supplemental 79.76 69.10 56.58 44.76
Dividend History
Annual Dividend Dividend Yield
2011 $ 1.12 17.02%
2012 $ 0.80 9.66%
2013 $ 0.80 9.40%
2014 $ 0.80 10.68%
2015 $ 0.80 15.33%
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
How much personal investment does management have in the company?
Insider Relation Owner Type Shares Held As Of Date
Hunt Gregory W. Officer Direct 26,268 12/16/2015
Goldthorpe Edward J. Officer Direct 50,000 8/11/2015
Stein Elliot Jr. Director Direct 22,265 8/7/2015
Puleo Frank C Director Direct 25,000 8/7/2015
Reinfrank Rudolph Director Direct 25,000 8/7/2015
Zetler James C Officer Direct 259,538 8/7/2015
Spielvogel Carl Director Indirect 500 6/10/2014
Top 5 Institutional Holdings
Company Name Shares Held
Thornburg Investments Management Inc. 25,055,339
FMR LLC 14,460,258
Fuller & Thaler Asset Management, Inc. 6,532,113
Bank Of Montreal 3,888,829
Invesco LTD 2,580,103
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Valuation: As Of 5/26/2016
(Data from Google Finance)
AINV’s Valuation Summary
AINV currently has a negative EPS of 0.19.
AINV’s Dividend yield is higher than the selected group of competition stocks in the
Investment sector. The yield is high which means that the cash flow received on an
annual dividend is roughly 15% on every dollar invested.
Dividend is paying out about 15% of the stock price. As long as the company continues
to pay its dividend we are compensated for holding the stock.
Company
Ticker Company Name Mkt Cap P/E EPS Dividend
Div
Yield
APO Apollo Global Management 3.09B 49.84 0.33 1.96 7.81%
PSEC Prospect Capital Corporation 2.69B 26.18 0.29 1.19 13.17%
AINV
Apollo Investment
Corporation 1.23B N/A -0.19 .80 15.07%
SAR Saratoga Investment Corp. 93.89M 7.71 2.12 1.36 10.14%
GBDC Golub Capital BDC Inc. 887.02M 12.1 1.42 1.28 7.43%
HTGC Hercules Capital Inc. 917.89M 25.9 0.48 1.19 13.17%
NMFC New Mountain Finance Corp. 796.60M 47.96 0.26 1.36 10.96%
SLRC Solar Capital Ltd. 774.06M 24.93 0.74 1.60 8.71%
TCPC TCP Capital Corporation 709.47M 13.65 1.06 1.44 9.89%
TCAP Triangle Capital 621.22M 11.72 1.56 2.16 11.81%
BKCC Blackrock Capital Investment 558.29M N/A -0.31 .84 11.32%
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Which analysts follow the stock?
ZACKS Research
Columbine Capital Research
Thomson Reuters Stock Reports
Ford Equity Research
What are the analyst recommendations?
Financial ratios:
Profitability 2013 2014 2015
Revenue Growth 14.86% 13.71% -12.42%
ROE 13.20% 3.89% -2.71%
Net Margin 71.03% 17.39% -11.73%
Gross Margin 100 % 100% 100%
Debt
Liquidity Ratio 60.70% 147.46% 122.09%
Debt-to-Capital 40.08% 43.61% 44.65%
Interest Coverage 4.947 1.95 0.45
Interest Funding - - 26.8%
Research Company Name Research Date Recommendation
ZACKS Report 5/17/2016 3-Hold
Industry Rank: 186/265
Columbine Capital Research 5/14/2016 Current Columbine Rating- Sell
Projecting that AINV will under
Perform the Market over the next
12 months and recommends that
investors sell it now.
Thomson Reuters 5/18/2016 Hold
9 out of 16 analyst are saying
hold.
Ford Equity Research 5/13/2016 Buy
Earnings strength is neutral
Relative value is very positive
Price Movement is Negative.
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Competition
Profitability Industry Avg.
Revenue Growth 9.60%
ROE 2.90%
Net Margin 0.07%
Gross Margin -
Debt
Liquidity Ratio 2.50%
Debt-to-Capital 39.20%
Interest Coverage 2.70
Interest Funding 0.0%
Financial Ratio Analysis
AINV has seen a decrease in revenue growth in the past three years.
ROE has decreased significantly over the past few years for AINV and was negative in
2015.
Interest funding for AINV is substantially above that of other close end funds.
Net margins for AINV are much higher than that of the industry average.
NAV of the AINV fund has decreased from $8.18 to $7.28 over the past year (-11%
decline). The current NAV is $7.28.
Stock is trading approximately 26% below the NAV of the portfolio.
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Concerns and challenges the company faces.
Over the past year, financial service companies have seen an increase in their stock price
relative to other sectors. The current economy is stable but slowing down. This could lead to a
downturn in the US equity market over the next year. Financials typically do not outperform the
market during these slowdowns and the sector could take a hit. If an economic downturn occurs
in the United States then there is a threat to this stocks price being that their portfolios are
comprised of roughly 83% of North American holdings. With Goldthorpe stepping down as
president of AINV and CIO of AIM , investment decisions in the future quarters regarding
Apollo Investment Management, L.P., could be different from the vision the past. This could
result in a positive or negative way making this resignation carry some uncertainty with the
future of AINV. The yield performance of the secured debt portfolio, the unsecured debt
portfolio, and total debt portfolio are down over the past year around .2 basis points off of 2015
annual yields of these portfolios.
Positive developments in the company: growth prospects for the stock and
the company.
The company repurchased 2.01 million shares of common stock in the fourth quarter of
their fiscal year. The total shares bought back as of March 31, 2016 were 10.58 million. This
buyback implied that the company values its stock higher than what it is trading at market price.
There is also a program that a subsidiary of Apollo Global Management LLC will embark on to
acquire $50 million worth of AINV’s common stock. If the energy sector comes back with the
increase in oil prices this summer, AINV’s 11.9% portion of their portfolios in energy holdings
could improve and the remaining core positions Canacol, Deep Gulf and Extraction are
performing in line. Extraction continues to raise junior capital and raised $93 million of equity in
April. AINV recently received co-investment exempted relief from the SEC. This relief provides
AINV the ability to participate in negotiated joint transactions with other funds that are managed
by Apollo. This has the potential to provide BDC shareholders with access to a broader array of
investment opportunities. Apollo Investment Management, along with the board members of
AINV, consulted on getting management fees reduced for the 2017 fiscal year. The new
management fee is 1.5%. AINV is currently investing in more secured debt, and the portion of
the portfolio consisting of secured debt is increasing. The higher the percentage of secured debt
that AINV takes on the less risky the portfolio becomes based off of the capital structure of the
portfolio companies AINV invests in. The company in the first quarter of 2016 is currently
invested in 76% secured debt
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Industry concerns
The Financials sector has come under pressure in many political debates regarding
current regulations and practices of the financial sector as well as the threat of higher interest
rates. The industry as a whole has performed fairly well YTD but there is more uncertainty in the
United States enters in the upcoming Presidential Election. Some of the challenges facing the
new Administration may include further regulation in the financial services industry. This could
result in higher costs and more disclosure for private equity and other investment management
organizations. Business development companies typically are subject to the risk associated with
the portfolio companies falling short of their recovery plans. The payout structure for the
portfolio companies could take a long time to process before AINV, as well as other BDC’s like
AINV, get compensated for investing in a company’s debt. The process of debt repayment could
take a long period of time due to the legal work associated with appropriating funds of the
portfolio companies.
Contingent Liabilities (eg. Outstanding lawsuits)
On May 20, 2013, the Company was named as a defendant in a complaint by the
bankruptcy trustee of DSI Renal Holdings and related companies (“DSI”). The complaint
alleges, among other things, that the Company participated in a “fraudulent conveyance”
involving a restructuring and subsequent sale of DSI in 2010 and 2011. The complaint seeks,
jointly and severally from all defendants, (1) damages of approximately $425 million, of which
the Company’s share would be approximately $41 million, and the return of 9,000 shares of
common stock of DSI obtained by the Company in the restructuring and sale and (2) punitive
damages. At this point in time, the Company is unable to assess whether it may have any liability
in this action. The Company has not made any determination that this action is or may be
material to the Company and intends to vigorously defend itself. The Company has filed a
motion to dismiss this litigation. The motion is pending.
102 Weatherby Court Savannah, GA 31405
912-777-6007 or 954-554-5370
Performance Analysis of the stock
Performance history (as of 5/19/2016)
Stock Performance (%) 1M 3M 6M YTD 1YR 5YR 10Yr
Price change (AINV) -8.15% 6.45% -14.74% 0.96% -32.00% 52.72% -72.2%
Price change (S&P
500) -2.89% 6.37% -1.99% -0.20% -3.89% 52.49% 116.92%
Price change (Nasdaq) -4.62% 4.59% -7.12% -5.90% -6.67% 66.57% 116.92%
Price Change
(Financial SPCTR
S&P 500 Sector
Index)
-.05% 11.59% -2.27% -0.22% -2.66% 73.09% 73.09%
Price Change (Russel
3000 Index) -0.18% 8.02% -0.47% 2.27% -2.75% 54.72% 69.06%
*Data From Google finance
Performance vs benchmark
On days when the market is up, AINV shares tend to lag the S&P 500 index. However,
on days when the market is down, the shares generally decrease less than the index.
YTD AINV is outperforming the S&P 500 slightly more than 1%.
Performance vs universe
AINV is outperforming the NASDAQ universe YTD.
The Stock has gained 52.72% in price change in the past 5 years and is slightly off the
NASDAQ’s 5 year price change of 66.57%
Performance vs industry and Cratus Capital benchmark
Compared to the rest of the Financials portion of the S&P 500, NAIV is underperforming
and has been for the past 5 years.
The Russell 3000 index compared to AINV, show price changes that are generally
smaller than that of AINV. AINV is underperforming it’s small Cap peer index.