Table of Contents
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 92-3084689 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
9 West 57th Street, 42nd Floor, New York, NY | 10019 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | Smaller reporting company | ☐ | |||
Emerging growth company | ☒ |
Table of Contents
Table of Contents
Table of Contents
• | our future operating results; |
• | our business prospects and the prospects of the Infrastructure Assets (as defined below) we acquire, control and manage; |
• | our ability to raise sufficient capital to execute our acquisition and lending strategies; |
• | the ability of Apollo Manager, LLC (the “Operating Manager”) to source adequate acquisition and lending opportunities to efficiently deploy capital; |
• | the ability of our Infrastructure Assets to achieve their objectives; |
• | our current and expected financing arrangements; |
• | changes in the general interest rate environment; |
• | the adequacy of our cash resources, financing sources and working capital; |
• | the timing and amount of cash flows, distributions and dividends, if any, from our Infrastructure Assets; |
• | our contractual arrangements and relationships with third parties; |
• | actual and potential conflicts of interest with the Operating Manager or any of its affiliates; |
• | the dependence of our future success on the general economy and its effect on the industries in which we acquire, control and manage Infrastructure Assets; |
• | our use of financial leverage; |
• | the ability of the Operating Manager to identify, acquire and manage our Infrastructure Assets; |
• | the ability of the Operating Manager or its affiliates to attract and retain highly talented professionals; |
• | our ability to structure acquisitions in a tax-efficient manner and the effect of changes to tax legislation and our tax position; and |
• | the tax status of the enterprises through which we acquire, control and manage Infrastructure Assets. |
• | changes in the economy; |
• | risks associated with possible disruption in our operations or the economy generally due to terrorism, natural disasters, epidemics or other events having a broad impact on the economy; and |
• | future changes in laws or regulations and conditions in our operating areas. |
Item 1. | Financial Statements |
as of March 31, 2024 (unaudited) | as of December 31, 2023 | |||||||||||||||||||||||
Series I | Series II | Total | Series I | Series II | Total | |||||||||||||||||||
Assets | ||||||||||||||||||||||||
Investments at fair value (cost at March 31, 2024 of $54,466; $217,309; $271,775; and at December 31, 2023 of $24,187; $112,121; $136,308; respectively) | $ | 55,263 | $ | 220,228 | $ | 275,491 | $ | 24,314 | $ | 112,701 | $ | 137,015 | ||||||||||||
Cash and cash equivalents | 30,350 | 67,235 | 97,585 | 21,575 | 99,696 | 121,271 | ||||||||||||||||||
Prepaid expenses and other assets | 110 | 836 | 946 | 190 | 877 | 1,067 | ||||||||||||||||||
Deferred offering expenses | 407 | 1,921 | 2,328 | 432 | 2,016 | 2,448 | ||||||||||||||||||
Subscription receivable | — | — | — | 500 | — | 500 | ||||||||||||||||||
Due from Operating Manager | 910 | 3,938 | 4,848 | 598 | 2,783 | 3,381 | ||||||||||||||||||
Total assets | $ | 87,040 | $ | 294,158 | $ | 381,198 | $ | 47,609 | $ | 218,073 | $ | 265,682 | ||||||||||||
Liabilities | ||||||||||||||||||||||||
Management fee payable | $ | — | $ | — | $ | — | $ | 32 | $ | 145 | $ | 177 | ||||||||||||
Accrued performance fee payable | 83 | 287 | 370 | 27 | 125 | 152 | ||||||||||||||||||
Distribution payable | 433 | 1,457 | 1,890 | — | — | — | ||||||||||||||||||
Organizational expenses payable | 12 | 67 | 79 | 12 | 67 | 79 | ||||||||||||||||||
Offering expenses payable | 34 | 163 | 197 | 34 | 163 | 197 | ||||||||||||||||||
Other accrued expenses and liabilities | 691 | 2,326 | 3,017 | 232 | 1,041 | 1,273 | ||||||||||||||||||
Due to Operating Manager | 720 | 3,088 | 3,808 | 530 | 2,486 | 3,016 | ||||||||||||||||||
Total liabilities | $ | 1,973 | $ | 7,388 | $ | 9,361 | $ | 867 | $ | 4,027 | $ | 4,894 | ||||||||||||
Commitments and contingencies (Note 6) | ||||||||||||||||||||||||
Total net assets | $ | 85,067 | $ | 286,770 | $ | 371,837 | $ | 46,742 | $ | 214,046 | $ | 260,788 | ||||||||||||
Net assets are comprised of: | ||||||||||||||||||||||||
A-II Shares, at March 31, 2024; Series I: 3,206,849; Series II: 11,142,749; and Total: 14,349,598, and at December 31, 2023; Series I: 1,851,311; Series II: 8,468,437; and Total: 10,319,748, shares authorized, issued and outstanding; respectively | $ | 81,901 | $ | 285,203 | $ | 367,104 | $ | 46,741 | $ | 214,045 | $ | 260,786 | ||||||||||||
F-I Shares, at March 31, 2024; Series I: 124,118; Series II: 61,294; and Total: 185,412, shares authorized, issued and outstanding; respectively | 3,165 | 1,566 | 4,731 | — | — | — | ||||||||||||||||||
V Shares, at March 31, 2024 Series I: 40; Series II: 40; and Total: 80, and at December 31, 2023; Series I: 40; Series II: 40; and Total: 80, shares authorized issued and outstanding; respectively | 1 | 1 | 2 | 1 | 1 | 2 | ||||||||||||||||||
Total net assets | $ | 85,067 | $ | 286,770 | $ | 371,837 | $ | 46,742 | $ | 214,046 | $ | 260,788 | ||||||||||||
Net asset value per share | ||||||||||||||||||||||||
A-II Shares: | ||||||||||||||||||||||||
Net assets | $ | 81,901 | $ | 285,203 | $ | 367,104 | $ | 46,741 | $ | 214,045 | $ | 260,786 | ||||||||||||
Shares outstanding | 3,206,849 | 11,142,749 | 14,349,598 | 1,851,311 | 8,468,437 | 10,319,748 | ||||||||||||||||||
Net asset value per share | $ | 25.54 | $ | 25.60 | $ | 25.58 | 25.25 | $ | 25.28 | $ | 25.27 | |||||||||||||
F-I Shares: | ||||||||||||||||||||||||
Net assets | $ | 3,165 | $ | 1,566 | $ | 4,731 | $ | — | $ | — | $ | — | ||||||||||||
Shares outstanding | 124,118 | 61,294 | 185,412 | — | — | — | ||||||||||||||||||
Net asset value per share | $ | 25.50 | $ | 25.55 | $ | 25.52 | $ | — | $ | — | $ | — | ||||||||||||
V Shares: | ||||||||||||||||||||||||
Net assets | $ | 1 | $ | 1 | $ | 2 | $ | 1 | $ | 1 | $ | 2 | ||||||||||||
Shares outstanding | 40 | 40 | 80 | 40 | 40 | 80 | ||||||||||||||||||
Net asset value per share | $ | 25.00 | $ | 25.00 | $ | 25.00 | $ | 25.00 | $ | 25.00 | $ | 25.00 | ||||||||||||
For the Three Months Ended March 31, 2024 | ||||||||||||
Series I | Series II | Total | ||||||||||
Investment income | ||||||||||||
Interest income | $ | 1,137 | $ | 4,110 | $ | 5,247 | ||||||
Total investment income | $ | 1,137 | $ | 4,110 | $ | 5,247 | ||||||
Expenses | ||||||||||||
General and administration expenses | $ | 410 | $ | 1,517 | $ | 1,927 | ||||||
Directors fees | 16 | 62 | 78 | |||||||||
Deferred offering expenses amortization | 25 | 95 | 120 | |||||||||
Management fees, net | 54 | 210 | 264 | |||||||||
Performance fees | 83 | 287 | 370 | |||||||||
Total expenses | $ | 588 | $ | 2,171 | $ | 2,759 | ||||||
Less: Expense support from Operating Manager | (312 | ) | (1,155 | ) | (1,467 | ) | ||||||
Net expenses | $ | 276 | $ | 1,016 | $ | 1,292 | ||||||
Net investment income before taxes | $ | 861 | $ | 3,094 | $ | 3,955 | ||||||
Provision for (benefit from) income taxes | 320 | 715 | 1,035 | |||||||||
Net investment income | $ | 541 | $ | 2,379 | $ | 2,920 | ||||||
Realized and unrealized gain/(loss) | ||||||||||||
Net realized gain/(loss) from investments | $ | — | $ | — | $ | — | ||||||
Net change in unrealized appreciation/(depreciation) from investments | 670 | 2,339 | 3,009 | |||||||||
Net realized and unrealized gain/(loss) | $ | 670 | $ | 2,339 | $ | 3,009 | ||||||
Net increase (decrease) in net assets resulting from operations | $ | 1,211 | $ | 4,718 | $ | 5,929 | ||||||
For the Three Months Ended March 31, 2024 | ||||||||||||
Series I | Series II | Total | ||||||||||
Operations | ||||||||||||
Net investment income | $ | 541 | $ | 2,379 | $ | 2,920 | ||||||
Net change in unrealized appreciation/(depreciation) from investments | 670 | 2,339 | 3,009 | |||||||||
Net increase (decrease) in net assets resulting from operations | $ | 1,211 | $ | 4,718 | $ | 5,929 | ||||||
Distributions | ||||||||||||
A-II Shares: | $ | (417 | ) | $ | (1,449 | ) | $ | (1,866 | ) | |||
F-I Shares: | (16 | ) | (8 | ) | (24 | ) | ||||||
Net increase (decrease) in net assets resulting from distributions | $ | (433 | ) | $ | (1,457 | ) | $ | (1,890 | ) | |||
Capital Share Transaction | ||||||||||||
A-II Shares: | ||||||||||||
Proceeds from issuance of shares | $ | 34,401 | $ | 67,908 | $ | 102,309 | ||||||
F-I Shares: | ||||||||||||
Proceeds from issuance of shares | $ | 3,146 | $ | 1,555 | $ | 4,701 | ||||||
Net increase (decrease) in capital share transaction | $ | 37,547 | $ | 69,463 | $ | 107,010 | ||||||
Net Assets | ||||||||||||
Total increase (decrease) in net assets during the period | $ | 38,325 | $ | 72,724 | $ | 111,049 | ||||||
Net assets at beginning of period | 46,742 | 214,046 | 260,788 | |||||||||
Net assets at end of period | $ | 85,067 | $ | 286,770 | $ | 371,837 | ||||||
For the Three Months Ended March 31, 2024 | ||||||||||||
Series I | Series II | Total | ||||||||||
Operating activities | ||||||||||||
Net increase/(decrease) in net assets resulting from operations | $ | 1,211 | $ | 4,718 | $ | 5,929 | ||||||
Adjustments to reconcile net increase/(decrease) in net assets resulting from operations | ||||||||||||
to net cash used in operating activities: | ||||||||||||
Net change in unrealized (appreciation)/depreciation from investments | (670 | ) | (2,339 | ) | (3,009 | ) | ||||||
Payment-in-kind | (672 | ) | (2,265 | ) | (2,937 | ) | ||||||
Acquisition of Infrastructure Assets | (29,607 | ) | (102,923 | ) | (132,530 | ) | ||||||
Deferred offering expenses amortization | 25 | 95 | 120 | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
Decrease in prepaid expenses and other assets | 80 | 41 | 121 | |||||||||
(Increase) in due from Operating Manager | (312 | ) | (1,155 | ) | (1,467 | ) | ||||||
(Decrease) in management fee payable | (32 | ) | (145 | ) | (177 | ) | ||||||
Increase in accrued performance fees | 56 | 162 | 218 | |||||||||
Increase in other accrued expenses and liabilities | 459 | 1,285 | 1,744 | |||||||||
Increase in due to Operating Manager | 190 | 602 | 792 | |||||||||
Net cash used in operating activities | $ | (29,272 | ) | $ | (101,924 | ) | $ | (131,196 | ) | |||
Financing activities | ||||||||||||
Proceeds from issuance of shares | 38,047 | 69,463 | 107,510 | |||||||||
Net cash provided by financing activities | $ | 38,047 | $ | 69,463 | $ | 107,510 | ||||||
Cash and cash equivalents | ||||||||||||
Net increase/(decrease) in cash and cash equivalents | 8,775 | (32,461 | ) | (23,686 | ) | |||||||
Cash and cash equivalents at beginning of period | 21,575 | 99,696 | 121,271 | |||||||||
Cash and cash equivalents at end of period | $ | 30,350 | $ | 67,235 | $ | 97,585 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Payment-in-kind | $ | 672 | $ | 2,265 | $ | 2,937 | ||||||
Noncash financing activities not included - distribution payable | $ | 433 | $ | 1,457 | $ | 1,890 |
Description | Country | Industry | Principal Amount or Number of Shares | Fair Value | Fair Value as a Percentage of Net Assets | |||||||||||
Series I | ||||||||||||||||
Investments in Partnership Investment Vehicle: (1) | ||||||||||||||||
Atlas Tank Parent, L.P. | United States | Transportation | $ | 4,224 | 4.97 | % | ||||||||||
Novus Holdings Parent, L.P. | United States | Aviation | 14,884 | 17.50 | % | |||||||||||
AIC 3-Z Subsidiary, LLC | Various | Various | 12,173 | 14.31 | % | |||||||||||
AP Nebula Solar Aggregator, L.P. (2) | United States | Renewables | 5,480 | 6.44 | % | |||||||||||
Total Investments in Partnership Investment Vehicle | $ | 36,761 | 43.22 | % | ||||||||||||
Investments in Loans: | ||||||||||||||||
Yondr Capital LP- 15.75%-17.75% 06/27/29 | Various | Communications | $ | 13,931,304 | $ | 13,965 | 16.42 | % | ||||||||
Longroad High Street Holdings, LLC- SOFR +3.75% 11/30/30 | United States | Energy | $ | 4,547,748 | 4,537 | 5.33 | % | |||||||||
Total Investments in Loans | $ | 18,502 | 21.75 | % | ||||||||||||
Total Investments - Series I (Cost of $54,466) | $ | 55,263 | 64.97 | % | ||||||||||||
Series II | ||||||||||||||||
Investments in Partnership Investment Vehicle: (1) | ||||||||||||||||
Atlas Tank Parent, L.P. | United States | Transportation | $ | 18,780 | 6.55 | % | ||||||||||
Novus Holdings Parent, L.P. | United States | Aviation | 50,116 | 17.48 | % | |||||||||||
AIC 3-Z Subsidiary, LLC | Various | Various | 48,130 | 16.78 | % | |||||||||||
AP Nebula Solar Aggregator, L.P. (2) | United States | Renewables | 19,318 | 6.73 | % | |||||||||||
Total Investments in Partnership Investment Vehicle | $ | 136,344 | 47.54 | % | ||||||||||||
Investments in Loans: | ||||||||||||||||
Yondr Capital LP- 15.75%-17.75% 06/27/29 | Various | Communications | $ | 63,583,266 | $ | 63,546 | 22.16 | % | ||||||||
Longroad High Street Holdings, LLC- SOFR +3.75% 11/30/30 | United States | Energy | $ | 20,452,253 | 20,338 | 7.09 | % | |||||||||
Total Investments in Loans | $ | 83,884 | 29.25 | % | ||||||||||||
Total Investments - Series II (Cost of $217,309) | $ | 220,228 | 76.79 | % | ||||||||||||
Total | ||||||||||||||||
Investments in Partnership Investment Vehicle: (1) | ||||||||||||||||
Atlas Tank Parent, L.P. | United States | Transportation | $ | 23,004 | 6.19 | % | ||||||||||
Novus Holdings Parent, L.P. | United States | Aviation | 65,000 | 17.48 | % | |||||||||||
AIC 3-Z Subsidiary, LLC | Various | Various | 60,303 | 16.22 | % | |||||||||||
AP Nebula Solar Aggregator, L.P. (2) | United States | Renewables | 24,798 | 6.67 | % | |||||||||||
Total Investments in Partnership Investment Vehicle | $ | 173,105 | 46.56 | % | ||||||||||||
Investments in Loans: | ||||||||||||||||
Yondr Capital LP- 15.75%-17.75% 06/27/29 | Various | Communications | $ | 77,514,570 | $ | 77,511 | 20.85 | % | ||||||||
Longroad High Street Holdings, LLC- SOFR +3.75% 11/30/30 | United States | Energy | $ | 25,000,000 | 24,875 | 6.69 | % | |||||||||
Total Investments in Loans | $ | 102,386 | 27.54 | % | ||||||||||||
Total Investments - Total (Cost of $271,775) | $ | 275,491 | 74.10 | % | ||||||||||||
(1) | Partnership investment vehicle includes investments in both limited partnerships and limited liability companies. |
(2) | Series I, Series II, and Total indirectly own 5,460,550, 19,251,968, and 24,712,518 units, respectively, in Juniper 1 Residential Solar LLC, in the renewables industry in the United States. The fair value of Series I, Series II, and Total investment was $5,460, $19,252, and $24,712, respectively. |
Description | Country | Industry | Principal Amount or Number of Shares | Fair Value | Fair Value as a Percentage of Net Assets | |||||||||||
Series I | ||||||||||||||||
Investments in Partnership Investment Vehicle: (1) | ||||||||||||||||
Atlas Tank Parent, L.P. | United States | Transportation | $ | 3,469 | 7.42 | % | ||||||||||
AIC 3-Z Subsidiary, LLC | Various | Various | 3,872 | 8.28 | % | |||||||||||
Total Investments in Partnership Investment Vehicle | $ | 7,341 | 15.70 | % | ||||||||||||
Investments in Loans: | ||||||||||||||||
Yondr Capital LP- 15.75%-17.75% 06/27/29 | Various | Communications | $ | 13,258,898 | $ | 13,133 | 28.10 | % | ||||||||
Longroad High Street Holdings, LLC- SOFR +3.75% 11/30/30 | United States | Energy | $ | 3,898,967 | 3,840 | 8.22 | % | |||||||||
Total Investments in Loans | $ | 16,973 | 36.32 | % | ||||||||||||
Total Investments - Series I (Cost of $24,187) | $ | 24,314 | 52.02 | % | ||||||||||||
Series II | ||||||||||||||||
Investments in Partnership Investment Vehicle: (1) | ||||||||||||||||
Atlas Tank Parent, L.P. | United States | Transportation | $ | 16,237 | 7.59 | % | ||||||||||
AIC 3-Z Subsidiary, LLC | Various | Various | 17,726 | 8.28 | % | |||||||||||
Total Investments in Partnership Investment Vehicle | $ | 33,963 | 15.87 | % | ||||||||||||
Investments in Loans: | ||||||||||||||||
Yondr Capital LP- 15.75%-17.75% 06/27/29 | Various | Communications | $ | 61,319,161 | $ | 60,745 | 28.38 | % | ||||||||
Longroad High Street Holdings, LLC- SOFR +3.75% 11/30/30 | United States | Energy | $ | 18,267,699 | 17,993 | 8.41 | % | |||||||||
Total Investments in Loans | $ | 78,738 | 36.79 | % | ||||||||||||
Total Investments - Series II (Cost of $112,121) | $ | 112,701 | 52.66 | % | ||||||||||||
Total | ||||||||||||||||
Investments in Partnership Investment Vehicle: (1) | ||||||||||||||||
Atlas Tank Parent, L.P. | United States | Transportation | $ | 19,706 | 7.56 | % | ||||||||||
AIC 3-Z Subsidiary, LLC | Various | Various | 21,598 | 8.28 | % | |||||||||||
Total Investments in Partnership Investment Vehicle | $ | 41,304 | 15.84 | % | ||||||||||||
Investments in Loans: | ||||||||||||||||
Yondr Capital LP- 15.75%-17.75% 06/27/29 | Various | Communications | $ | 74,578,059 | $ | 73,878 | 28.33 | % | ||||||||
Longroad High Street Holdings, LLC- SOFR +3.75% 11/30/30 | United States | Energy | $ | 22,166,666 | 21,833 | 8.37 | % | |||||||||
Total Investments in Loans | $ | 95,711 | 36.70 | % | ||||||||||||
Total Investments - Total (Cost of $136,308) | $ | 137,015 | 52.54 | % | ||||||||||||
(1) | Partnership investment vehicle includes investments in both limited partnerships and limited liability companies. |
1. | Organization |
2. | Summary of Significant Accounting Policies |
3. | Fair Value Measurement and Disclosures |
March 31, 2024 | ||||||||||||||||||||
Description | Total | Level I | Level II | Level III | Measured at NAV (1) | |||||||||||||||
Series I | ||||||||||||||||||||
Investments in Partnership Investment Vehicle | $ | 36,761 | $ | — | $ | — | $ | 19,108 | $ | 17,653 | ||||||||||
Investments in Loans | 18,502 | — | — | 18,502 | — | |||||||||||||||
Total Investments | $ | 55,263 | $ | — | $ | — | $ | 37,610 | $ | 17,653 | ||||||||||
Cash and cash equivalents | 30,350 | 30,350 | — | — | — | |||||||||||||||
Total | $ | 85,613 | $ | 30,350 | $ | — | $ | 37,610 | $ | 17,653 | ||||||||||
Series II | ||||||||||||||||||||
Investments in Partnership Investment Vehicle | $ | 136,344 | $ | — | $ | — | $ | 68,896 | $ | 67,448 | ||||||||||
Investments in Loans | 83,884 | — | — | 83,884 | — | |||||||||||||||
Total Investments | $ | 220,228 | $ | — | $ | — | $ | 152,780 | $ | 67,448 | ||||||||||
Cash and cash equivalents | 67,235 | 67,235 | — | — | — | |||||||||||||||
Total | $ | 287,463 | $ | 67,235 | $ | — | $ | 152,780 | $ | 67,448 | ||||||||||
Total | ||||||||||||||||||||
Investments in Partnership Investment Vehicle | $ | 173,105 | $ | — | $ | — | $ | 88,004 | $ | 85,101 | ||||||||||
Investments in Loans | 102,386 | — | — | 102,386 | — | |||||||||||||||
Total Investments | $ | 275,491 | $ | — | $ | — | $ | 190,390 | $ | 85,101 | ||||||||||
Cash and cash equivalents | 97,585 | 97,585 | — | — | — | |||||||||||||||
Total | $ | 373,076 | $ | 97,585 | $ | — | $ | 190,390 | $ | 85,101 | ||||||||||
(1) | Included within certain investments measured at NAV were Level III investments valued at Transaction Price. Series I, Series II, and Total Level III amounts of these investments were $5,460, $19,252, and $24,712, respectively. |
December 31, 2023 | ||||||||||||||||||||
Description | Total | Level I | Level II | Level III | Measured at NAV | |||||||||||||||
Series I | ||||||||||||||||||||
Investments in Partnership Investment Vehicle | $ | 7,341 | $ | — | $ | — | $ | 3,469 | $ | 3,872 | ||||||||||
Investments in Loans | 16,973 | — | — | 16,973 | — | |||||||||||||||
Total Investments | $ | 24,314 | $ | — | $ | — | $ | 20,442 | $ | 3,872 | ||||||||||
Cash and cash equivalents | 21,575 | 21,575 | — | — | — | |||||||||||||||
Total | $ | 45,889 | $ | 21,575 | $ | — | $ | 20,442 | $ | 3,872 | ||||||||||
Series II | ||||||||||||||||||||
Investments in Partnership Investment Vehicle | $ | 33,963 | $ | — | $ | — | $ | 16,237 | $ | 17,726 | ||||||||||
Investments in Loans | 78,738 | — | — | 78,738 | — | |||||||||||||||
Total Investments | $ | 112,701 | $ | — | $ | — | $ | 94,975 | $ | 17,726 | ||||||||||
Cash and cash equivalents | 99,696 | 99,696 | — | — | — | |||||||||||||||
Total | $ | 212,397 | $ | 99,696 | $ | — | $ | 94,975 | $ | 17,726 | ||||||||||
Total | ||||||||||||||||||||
Investments in Partnership Investment Vehicle | $ | 41,304 | $ | — | $ | — | $ | 19,706 | $ | 21,598 | ||||||||||
Investments in Loans | 95,711 | — | — | 95,711 | — | |||||||||||||||
Total Investments | $ | 137,015 | $ | — | $ | — | $ | 115,417 | $ | 21,598 | ||||||||||
Cash and cash equivalents | 121,271 | 121,271 | — | — | — | |||||||||||||||
Total | $ | 258,286 | $ | 121,271 | $ | — | $ | 115,417 | $ | 21,598 | ||||||||||
Description | Level III Investments | |||
Series I | ||||
Balance as of December 31, 2023 | $ | 20,442 | ||
Purchases, including capitalized PIK | 16,799 | |||
Net change in unrealized appreciation/(depreciation) from investments | 369 | |||
Transfers out of Level III | — | |||
Transfers into Level III | — | |||
Balance as of March 31, 2024 | $ | 37,610 | ||
Series II | ||||
Balance as of December 31, 2023 | $ | 94,975 | ||
Purchases, including capitalized PIK | 56,563 | |||
Net change in unrealized appreciation/(depreciation) from investments | 1,242 | |||
Transfers out of Level III | — | |||
Transfers into Level III | — | |||
Balance as of March 31, 2024 | $ | 152,780 | ||
Total | ||||
Balance as of December 31, 2023 | $ | 115,417 | ||
Purchases, including capitalized PIK | 73,362 | |||
Net change in unrealized appreciation/(depreciation) from investments | 1,611 | |||
Transfers out of Level III | — | |||
Transfers into Level III | — | |||
Balance as of March 31, 2024 | $ | 190,390 | ||
March 31, 2024 | ||||||||||||
Asset Type | Level III Fair Value | Valuation Technique | Unobservable Input | Input | ||||||||
Series I | ||||||||||||
Investments in Partnership Investment Vehicle | $ | 19,108 | Discounted Cash Flow | Discount Rate | 15.10 | % | ||||||
Terminal Multiple | 8.5x | |||||||||||
Transaction Price | N/A | N/A | ||||||||||
Investments in Loans | 18,502 | Discounted Cash Flow | Discount Rate | 7.77 17.50 | %- % | |||||||
Total | $ | 37,610 | ||||||||||
Series II | ||||||||||||
Investments in Partnership Investment Vehicle | $ | 68,896 | Discounted Cash Flow | Discount Rate | 15.10 | % | ||||||
Terminal Multiple | 8.5x | |||||||||||
Transaction Price | N/A | N/A | ||||||||||
Investments in Loans | 83,884 | Discounted Cash Flow | Discount Rate | 7.77 17.50 | %- % | |||||||
Total | $ | 152,780 | ||||||||||
Total | ||||||||||||
Investments in Partnership Investment Vehicle | $ | 88,004 | Discounted Cash Flow | Discount Rate | 15.10 | % | ||||||
Terminal Multiple | 8.5x | |||||||||||
Transaction Price | N/A | N/A | ||||||||||
Investments in Loans | 102,386 | Discounted Cash Flow | Discount Rate | 7.77 17.50 | %- % | |||||||
Total | $ | 190,390 | ||||||||||
December 31, 2023 | ||||||||||||
Asset Type | Level III Fair Value | Valuation Technique | Unobservable Input | Input | ||||||||
Series I | ||||||||||||
Investments in Partnership Investment Vehicle | $ | 3,469 | Discounted Cash Flow | Discount Rate | 15.10 | % | ||||||
Terminal Multiple | 8.5x | |||||||||||
Investments in Loans | 16,973 | Transaction Price (1) | N/A | N/A | ||||||||
Total | $ | 20,442 | ||||||||||
Series II | ||||||||||||
Investments in Partnership Investment Vehicle | $ | 16,237 | Discounted Cash Flow | Discount Rate | 15.10 | % | ||||||
Terminal Multiple | 8.5x | |||||||||||
Investments in Loans | 78,738 | Transaction Price (1) | N/A | N/A | ||||||||
Total | $ | 94,975 | ||||||||||
Total | ||||||||||||
Investments in Partnership Investment Vehicle | $ | 19,706 | Discounted Cash Flow | Discount Rate | 15.10 | % | ||||||
Terminal Multiple | 8.5x | |||||||||||
Investments in Loans | 95,711 | Transaction Price (1) | N/A | N/A | ||||||||
Total | $ | 115,417 | ||||||||||
(1) | The Investments in Loans valued at Transaction Price include certain loans held by the Company that, pursuant to their contractual terms, produce PIK income. PIK income computed at the contractual rate is accrued into income and reflected as a receivable up to the capitalization date. As of December 31, 2023, Series I, Series II and Total, earned and capitalized PIK income of $ 184, $845 , and $1,029, respectively. |
4. | Related Party Considerations |
5. | Shareholders’ Equity |
Series I | Series II | Total | ||||||||||||||||||||||
Shares | Consideration Amount | Shares | Consideration Amount | Shares | Consideration Amount | |||||||||||||||||||
A-II Shares: | ||||||||||||||||||||||||
Balance as of December 31, 2023 | 1,851,311 | $ | 46,339 | 8,468,437 | $ | 211,995 | 10,319,748 | $ | 258,334 | |||||||||||||||
Proceeds from issuance of shares | 1,355,538 | 34,401 | 2,674,312 | 67,908 | 4,029,850 | 102,309 | ||||||||||||||||||
Net increase (decrease) | 1,355,538 | $ | 34,401 | 2,674,312 | $ | 67,908 | 4,029,850 | $ | 102,309 | |||||||||||||||
Balance as of March 31, 2024 | 3,206,849 | $ | 80,740 | 11,142,749 | $ | 279,903 | 14,349,598 | $ | 360,643 | |||||||||||||||
F-I Shares: | ||||||||||||||||||||||||
Balance as of December 31, 2023 | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||
Proceeds from issuance of shares | 124,118 | 3,146 | 61,294 | 1,555 | 185,412 | 4,701 | ||||||||||||||||||
Net increase (decrease) | 124,118 | $ | 3,146 | 61,294 | $ | 1,555 | 185,412 | $ | 4,701 | |||||||||||||||
Balance as of March 31, 2024 | 124,118 | $ | 3,146 | 61,294 | $ | 1,555 | 185,412 | $ | 4,701 | |||||||||||||||
V Shares: | ||||||||||||||||||||||||
Balance as of December 31, 2023 | 40 | $ | 1 | 40 | $ | 1 | 80 | $ | 2 | |||||||||||||||
Proceeds from issuance of shares | — | — | — | — | — | — | ||||||||||||||||||
Net increase (decrease) | — | $ | — | — | $ | — | — | $ | — | |||||||||||||||
Balance as of March 31, 2024 | 40 | $ | 1 | 40 | $ | 1 | 80 | $ | 2 | |||||||||||||||
Total net increase (decrease) | 1,479,656 | $ | 37,547 | 2,735,606 | $ | 69,463 | 4,215,262 | $ | 107,010 | |||||||||||||||
Series I | Series II | |||||||||||||||
A-II Shares | F-I Shares | A-II Shares | F-I Shares | |||||||||||||
Distributions declared per share | $ | 0.13 | $ | 0.13 | $ | 0.13 | $ | 0.13 |
Series I | Series II | Total | ||||||||||||||||||||||
A-II Shares | F-I Shares | A-II Shares | F-I Shares | A-II Shares | F-I Shares | |||||||||||||||||||
Aggregate distributions by share type | $ | 417 | $ | 16 | $ | 1,449 | $ | 8 | $ | 1,866 | $ | 24 |
6. | Commitments and Contingencies |
7. | Income Taxes |
8. | Financial Highlights |
Series I A-II Shares | Series I F-I Shares | Series II A-II Shares | Series II F-I Shares | Total A-II Shares | Total F-I Shares | |||||||||||||||||||
Per Share Data: | ||||||||||||||||||||||||
Net asset value at beginning of period | $ | 25.25 | $ | — | $ | 25.28 | $ | — | $ | 25.27 | $ | — | ||||||||||||
Proceeds from issuance of shares | — | 25.34 | — | 25.37 | — | 25.35 | ||||||||||||||||||
Distributions declared (1) | (0.13 | ) | (0.13 | ) | (0.13 | ) | (0.13 | ) | (0.13 | ) | (0.13 | ) | ||||||||||||
Net investment income (2) | 0.20 | 0.14 | 0.23 | 0.18 | 0.22 | 0.16 | ||||||||||||||||||
Net realized and unrealized gain/(loss) (3) | 0.22 | 0.15 | 0.22 | 0.13 | 0.22 | 0.14 | ||||||||||||||||||
Net increase (decrease) in net assets resulting from operations | $ | 0.42 | $ | 0.29 | $ | 0.45 | $ | 0.31 | $ | 0.44 | $ | 0.30 | ||||||||||||
Net asset value at end of period | $ | 25.54 | $ | 25.50 | $ | 25.60 | $ | 25.55 | $ | 25.58 | $ | 25.52 | ||||||||||||
Shares outstanding at end of period | 3,206,849 | 124,118 | 11,142,749 | 61,294 | 14,349,598 | 185,412 | ||||||||||||||||||
Weighted average shares outstanding | 2,673,944 | 81,925 | 10,243,423 | 42,283 | 12,917,368 | 124,208 | ||||||||||||||||||
Ratio/Supplemental Data: | ||||||||||||||||||||||||
Net assets at end of period | $ | 81,901 | $ | 3,165 | $ | 285,203 | $ | 1,566 | $ | 367,104 | $ | 4,731 | ||||||||||||
Annualized ratio to average net assets ( 4 ) | ||||||||||||||||||||||||
Total expenses before expense support and after performance fees (5),(6) | 3.00 | % | 3.36 | % | 2.99 | % | 3.42 | % | 2.99 | % | 3.38 | % | ||||||||||||
Total expenses after expense support and after performance fees (5),(6) | 1.22 | % | 1.53 | % | 1.22 | % | 1.55 | % | 1.22 | % | 1.54 | % | ||||||||||||
Total expenses after expense support and before performance fees (5),(6) | 1.10 | % | 1.32 | % | 1.11 | % | 1.34 | % | 1.11 | % | 1.33 | % | ||||||||||||
Net investment income (5),(6) | 4.83 | % | 4.38 | % | 4.80 | % | 4.29 | % | 4.80 | % | 4.35 | % | ||||||||||||
Total return (7) | 1.67 | % | 1.50 | % | 1.78 | % | 1.62 | % | 1.76 | % | 1.54 | % |
(1) | The per share data for distributions was derived by using the actual shares outstanding at the date of the relevant transaction (refer to Note 6) |
(2) | The per share data was derived by using the weighted average shares outstanding during the applicable period. |
(3) | The amount shown at this caption is the balancing amount derived from the other figures in the table. The amount shown at this caption for a share outstanding throughout the period may not agree with the change in the aggregate gains and losses in investments for the period because of the timing of sales of the Company’s shares in relation to fluctuating market value for the portfolio. |
(4) | Actual results may not be indicative of future results. Additionally, an individual shareholder’s ratio may vary from the ratios presented for a share class as a whole. |
(5) | The ratios were derived using the weighted average net assets during the applicable period. |
(6) | For the applicable period, interest income and operating expenses are annualized except for organizational expenses and performance fees. |
(7) | The Total return is calculated for each share class as the change in the net asset value for such share class during the period plus any distributions per share declared in the period, and assumes any distributions are reinvested in accordance with our distribution reinvestment plan. Amounts are not annualized and are not representative of total return as calculated for purposes of the Performance Fees as described in “Note 4. Related Party Considerations.” The Company, Series I and Series II’s performance changes over time and currently may be different than that shown above. Past performance is no guarantee of future results. Investment performance is presented without regard to sales load that may be incurred by Shareholders in the purchase of the Company, Series I and Series II’s shares. |
9. | Subsequent Events |
Type | Number of Shares Sold | Aggregate Consideration | ||||||
Series I | ||||||||
A-II Shares | 609,294 | $ | 15,561 | |||||
F-I Shares | 50,986 | 1,300 | ||||||
Series II | ||||||||
A-II Shares | 1,001,274 | $ | 25,628 | |||||
F-I Shares | 9,783 | 250 |
Table of Contents
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion should be read in conjunction with the financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. In addition to historical data, this discussion contains forward-looking statements about our business, operations and financial performance based on current expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those in this discussion as a result of various factors, including but not limited to those discussed in “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. All dollar amounts in this “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” are in thousands, unless otherwise noted.
Overview
The Company was formed on April 3, 2023 as a Delaware limited liability company and we conduct our operations in a manner such that we are not required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”). We are a holding company whose mission is to be a leading owner and operator of and capital provider to Infrastructure Assets across global private markets. In doing so, our objective is to generate excess returns per unit of risk for our Shareholders consisting of both current income and long-term capital appreciation. We plan to establish operations and provide capital to Infrastructure Assets across power and renewables, transportation, communications, and social infrastructure sectors (collectively, the “Target Sectors”). We seek to have a global footprint, focusing primarily on opportunities in North America, countries in Western Europe and member states of the Organization for Economic Co-operation and Development (“OECD”).
The term “Infrastructure Assets” refers, individually and collectively, to the infrastructure businesses or other assets that are or will be owned by the Company and its direct or indirect subsidiaries, including, as the context requires, (i) majority-controlled infrastructure businesses or other assets, holding companies, special purpose vehicles, as well as loans to such entities tied to specific infrastructure projects, and (ii) to a lesser extent, equity acquisitions, corporate carve outs, any investments made by us in any other infrastructure-related entities or assets not controlled by the Company and any other entities through which infrastructure assets or businesses are or will be held.
The Company commenced principal operations on November 1, 2023.
On April 10, 2023, the Company established two registered series of limited liability company interests, Apollo Infrastructure Company LLC–Series I (“Series I”) and Apollo Infrastructure Company LLC–Series II (“Series II” and, together with Series I, the “Series”), pursuant to the Delaware Limited Liability Company Act (as amended from time to time, the “LLC Act”), and although the U.S. Internal Revenue Service (“IRS”) has only issued proposed regulations relating to series entities, each Series is intended to be treated as a separate entity, and have a different tax classification, for U.S. federal income tax purposes. Under Delaware law, to the extent the records maintained for a Series account for the assets associated with such Series separately from the other assets of the Company or any other Series, the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to such Series are segregated and enforceable only against the assets of such Series and not against the assets of the Company generally or any other Series. Series I and Series II are expected to invest, directly or indirectly, in the same portfolio of Infrastructure Assets on a pro rata basis. Series I has elected to be treated as a corporation for U.S. federal income tax purposes and Series II is intended to be treated as a partnership for U.S. federal income tax purposes. The state tax treatment of a series limited liability company depends on the laws of each state, and it is possible that a particular state may treat Series I and Series II as a single entity for state tax purposes or may treat Series I or Series II as separate entities but classified differently than the IRS does for U.S. federal income tax purposes. The Series conduct the business of the Company jointly and although they have the ability and intention to contract in their own names, they expect to do so jointly and in coordination with one another. Neither Series has directors, officers or employees, but each is overseen by the Board and managed by the Operating Manager.
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We are sponsored by Apollo Asset Management, Inc. (together with its subsidiaries, “Apollo”) and benefit from Apollo’s asset sourcing, operations, and portfolio management capabilities pursuant to an operating agreement (the “Operating Agreement”) with Apollo Manager, LLC (the “Operating Manager”). The Operating Manager manages the Company on a day-to-day basis, together with our executive officers, and provides certain management, administrative and advisory services related to identifying, acquiring, owning, controlling and providing capital to Infrastructure Assets and to a lesser extent performs the same role with respect to the other investments described below. The Company, through the Operating Manager’s guidance, leverages Apollo’s extensive infrastructure investing strategy to identify potential Infrastructure Assets within its key business strategies, perform due diligence and acquire infrastructure assets.
Infrastructure Assets do and are expected to continue to make up a substantial portion of our assets. Additionally, we expect that the remainder of our assets will consist of cash and cash equivalents, U.S. Treasury securities, U.S. government agency securities, municipal securities, other sovereign debt, investment grade credit, and other investments including high yield credit, asset backed securities, mortgage backed securities, collateralized loan obligations, leveraged loans and/or debt of companies or assets (collectively, the “Liquidity Portfolio”), in each case to facilitate capital deployment and provide a potential source of liquidity. These types of liquid assets may exceed AIC’s target investment allocations, if any, at any given time due to distributions from, or dispositions of, Infrastructure Assets or for other reasons as our Operating Manager determines.
Recent Developments
Infrastructure Assets Activity
For the three months ended March 31, 2024, the Company acquired interests in new Infrastructure Assets as follows:
A subsidiary of the Company has acquired an equity position in a joint venture issued by a developer of residential solar assets.
A subsidiary of the Company has acquired an equity position issued by a fixed base operator platform serving business and general aviation.
The Company has also acquired first lien senior secured notes in the midstream oil and gas, transportation and renewables industries.
April Financial Update
As of April 1, 2024, the Company issued and sold the following unregistered shares of the Company to third party investors for cash ($ in thousands):
Type | Number of Shares Sold | Aggregate Consideration | ||||||
Series I | ||||||||
A-II Shares | 609,294 | $ | 15,561 | |||||
F-I Shares | 50,986 | 1,300 | ||||||
Series II | ||||||||
A-II Shares | 1,001,274 | $ | 25,628 | |||||
F-I Shares | 9,783 | 250 |
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Results of Operations
We conduct a continuous private offering of our Shares on a monthly basis to (i) accredited investors (as defined in Regulation D under the Securities Act) and (ii) in the case of Shares sold outside the United States, to persons that are not “U.S. persons” (as defined in Regulation S under the Securities Act) in reliance on exemptions from the registration requirements of the Securities Act (the “Private Offering”).
We are dependent upon the proceeds from our continuous Private Offering in order to conduct our business. We intend to continue to acquire Infrastructure Assets with the capital received from our continuous Private Offering and any indebtedness that we may incur in connection with such activities.
A discussion of the results of operations for the three months ended March 31, 2024 is as follows:
Revenues
We generate revenues primarily from our long-term control and management of control-oriented Infrastructure Assets, Infrastructure Asset financings and to a lesser extent strategic investments in Infrastructure Assets, which may consist of dividend income, interest income, net realized gains or losses and net change in unrealized appreciation or depreciation of Infrastructure Assets.
Series I recorded $1,807 of revenues for the three months ended March 31, 2024 consisting of $1,137 of interest income and $670 of net change in unrealized appreciation. Series II recorded $6,449 of revenues for the three months ended March 31, 2024 consisting of $4,110 of interest income and $2,339 of net change in unrealized appreciation. Such revenues were generated from our Liquidity Portfolio and our Infrastructure Assets.
Expenses
The below description of expenses applies with respect to each Series and is the same for each Series unless otherwise indicated, pursuant to the Operating Agreement.
Management Fee
Pursuant to the Operating Agreement, the Operating Manager is entitled to receive a management fee (the “Management Fee”). The Management Fee is payable monthly in arrears in an amount equal to (i) 1.25% per annum of the month-end NAV attributable to S Shares and I Shares, (ii) 1.00% per annum of the month-end NAV attributable to F-S Shares and F-I Shares, (iii) 0.75% per annum of the month-end NAV attributable to the A-I Shares until December 31, 2026 and 1.00% per annum of the month-end NAV attributable to the A-I Shares thereafter and (iv) 0.50% per annum of the month-end NAV attributable to the A-II Shares; provided, that this Management Fee will be reduced by any applicable Special Fees (as defined below); provided, however, that this Management Fee will not be reduced for any other fees. In calculating the Management Fee, we will use our NAV before giving effect to accruals for the Management Fee, Performance Fee (as defined below), combined annual distribution fee and shareholder servicing fee or distributions payable on our Shares. We do not pay the Operating Manager a Management Fee on Apollo Shares and as a result, it is an expense specific only to Shares held by investors at the rates specified herein, which will result in the dilution of Investor Shares in proportion to the fees charged to different types of Investor Shares.
For the three months ended March 31, 2024, the Operating Manager earned gross Management Fees of $91, $331, and $422 from Series I, Series II and Total, respectively, with a Special Fees offset of $37, $121 and $158, from Series I, Series II and Total, respectively, resulting in net management fees of $54, $210 and $264 from Series I, Series II and Total, respectively.
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Selling Commissions and Ongoing Distribution and Servicing Fees
Apollo Global Securities, LLC (the “Dealer Manager” or “AGS”) is entitled to receive selling commissions of up to 3.0%, and dealer manager fees of up to 0.5%, of the transaction price of each S Share and F-S Share. Any participating broker-dealers are compensated from such amounts by reallowance from the Dealer Manager; provided that the sum of such reallowed amounts and the selling commissions do not exceed 3.5% of the transaction price. The Dealer Manager will receive a combined annual distribution fee and shareholder servicing fee of 0.85% per annum of the aggregate NAV of the Company’s outstanding S Shares and F-S Shares. There will not be a combined annual distribution fee and shareholder servicing fee, upfront selling commission or dealer manager fee with respect to the A-I Shares, A-II Shares, I Shares or F-I Shares. The Dealer Manager anticipates that all or a portion of selling commissions and dealer manager fees will be reallowed to participating broker-dealers.
Apollo Shares will not incur any upfront selling costs or ongoing servicing costs.
For the three months ended March 31, 2024, neither Series paid the Dealer Manager for any annual distribution fees, shareholder servicing fees, upfront selling commission or dealer manager fees.
Special Fees
Any net consulting (including management consulting) or monitoring fees (including any early termination fee or acceleration of any such management consulting fee on a one-time basis that is approved by the Board), break-up fees (including, if applicable, the portion thereof described in “Part I, Item 1A. Risk Factors—Risks Related to our Company and an Investment in our Shares—Our business may be affected by offering Co-Investments or opportunities to provide debt financing to any person” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023), directors’ fees, closing fees and merger and acquisition transaction advisory services fees related to the negotiation of the acquisition of an Infrastructure Asset (other than debt investments or investments with respect to which Apollo does not exercise direct control with respect to the decision to engage the services giving rise to the relevant fees, costs and expenses) and similar fees, whether in cash or in kind, including options, warrants and other non-cash consideration paid to the Operating Manager or any of its affiliates or any employees of the foregoing in connection with actual or contemplated acquisitions or investments (and allocable to the Company) (collectively, the “Special Fees”) that are allocable to those Shareholders who bear Management Fees, will be applied to reduce the Management Fees paid by such Management Fee-bearing Shareholders. As such, the portion of such Special Fees attributable to Apollo’s investment or to the investments of Shareholders that do not pay Management Fees will be retained by Apollo. In practice, the only fees that are generally expected to be paid and treated as Special Fees are mergers and acquisition transaction fees payable in connection with an acquisition and management consulting fees payable thereafter.
For the three months ended March 31, 2024, $1,226 of Special Fees allocable to the Company were received by an affiliate of the Operating Manager, of which $37, $121, and $158 were used to offset Management Fees for Series I, Series II and Total, respectively. As of March 31, 2024, Series I, Series II and Total share of remaining Special Fees allocable for future management fee offset was $244, $824, and $1,068 for Series I, Series II and Total, respectively.
Performance Fee
So long as the Operating Agreement has not been terminated, the Operating Manager is entitled to receive a performance fee equal to (i) 12.5% of the total return with respect to S Shares or I Shares, (ii) 9.0% of the total return with respect to F-S Shares or F-I Shares, (iii) 7.5% of the total return from inception through December 31, 2026 and 9.0% thereafter with respect to A-I Shares and (iv) 5.0% of the total return with respect to A-II Shares, in each case subject to a 5.0% hurdle amount and a high water mark with respect to such type of Shares, with a catch-up. Such fee will be paid annually and accrue monthly. The performance fee is not paid on Apollo Shares, and as a result, it is an expense specific only to Investor Shares at the rates specified herein, which will result in the dilution of Investor Shares in proportion to the fees charged to different types of Investor Shares.
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For the three months ended March 31, 2024, the Operating Manager earned Performance Fees of $83, $287, and $370 from Series I, Series II and Total, respectively.
Organizational and Offering Expenses
The Company incurred organizational and offering expenses in connection with the formation and organization of the Company and the Series, and the offering of shares to investors, including legal, accounting, printing, mailing and filing fees and expenses, taxes, due diligence expenses of participating broker-dealers supported by detailed and itemized invoices, costs in connection with preparing sales materials, design, website and electronic database expenses, fees and expenses of our escrow agent and transfer agent, fees to attend retail seminars sponsored by participating broker-dealers and reimbursements for customary travel, lodging and meals and other similar fees, costs and expenses but excluding upfront selling commissions, dealer manager fees and the combined annual distribution fees and shareholder servicing fees (collectively, the “Organizational and Offering Expenses”).
Series I, Series II, and Total did not incur organizational expenses for the three months ended March 31, 2024.
Series I, Series II and Total amortized offering expenses of $25, $95, and $120, respectively, for the three months ended March 31, 2024. The remaining amounts are deferred and reflected in the Consolidated Statements of Assets and Liabilities in the financial statements of the Company.
Organizational and Offering Expenses are paid by the Operating Manager, subject to potential recoupment as described in “Part I, Item 1. Financial Statements—Notes to Financial Statements (Unaudited) —Note 4. Related Party Considerations.”
Operating Expenses
Each Series will pay or otherwise bear its proportionate portion of the payments, fees, costs, expenses and other liabilities (for the avoidance of doubt, including any applicable value added tax) or obligations resulting from, related to, associated with, arising from or incurred in connection with the Company’s operations (collectively, the “Operating Expenses”).
The Operating Manager and its affiliates will be entitled to reimbursement from each Series, in its proportionate share, for any Operating Expenses or Organizational and Offering Expenses paid or incurred by them on behalf of, or in relation to, such Series.
If any Operating Expenses are incurred for the account or for the benefit of each Series and one or more other Apollo Clients, the Operating Manager will allocate such Operating Expenses among such Series and each such other Apollo Client in proportion to the size of the investment made by each in the activity or entity to which such Operating Expenses relate, to the extent applicable, or in such other manner as the Operating Manager in good faith determines is fair and reasonable.
Series I, Series II, and Total incurred Operating Expenses of $426, $1,579, and $2,005, respectively, for the three months ended March 31, 2024. These expenses relate to general and administration expenses and director fees.
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Company Expense Support and Conditional Reimbursement of the Operating Manager
On June 15, 2023, the Company entered into an Expense Support and Conditional Reimbursement Agreement (the “Expense Support Agreement”) with the Operating Manager pursuant to which the Operating Manager may elect to pay certain of the Company’s expenses, including certain Organizational and Offering Expenses, on our behalf (each, an “Expense Support”).
Following any calendar month in which the Specified Expenses are below 0.60% of the Company’s net assets on an annualized basis, the Company shall reimburse the Operating Manager, fully or partially, for the Expense Supports, but only if and to the extent that Specified Expenses plus any Reimbursement Payments (defined below) do not exceed 0.60% of the Company’s net assets at the end of each calendar month on an annualized basis, until such time as all Expense Supports made by the Operating Manager to the Company within three years prior to the last business day of such calendar month have been reimbursed. Any payments required to be made by the Company in the prior sentence shall be referred to herein as a “Reimbursement Payment.”
“Specified Expenses” means all expenses incurred in the business of the Company with the exception of (i) the Management Fee, (ii) the Performance Fee, (iii) the combined annual distribution fees and shareholder servicing fees, (iv) the dealer manager fees (including selling commissions), (v) Infrastructure Asset related expenses, (vi) interest expenses, commitment fees, or other expenses related to any leverage incurred by the Company, (vii) taxes, (viii) certain insurance costs, (ix) Organizational and Offering Expenses, (x) certain non-routine items (as determined in the sole discretion of the Operating Manager) and (xi) extraordinary expenses (as determined in the sole discretion of the Operating Manager).
For the three months ended March 31, 2024, the Operating Manager elected to provide an Expense Support of $312, $1,155, and $1,467 for expenses incurred by Series I, Series II, and Total, respectively.
Income Taxes
For the three months ended March 31, 2024, Series I, Series II and Total had an income tax provision of $320, $715, and $1,035, respectively, comprising of U.S. federal and state taxes, which are based upon income, dividends, and gains earned.
Net Asset Value
We calculate NAV per Share in accordance with valuation policies and procedures that have been approved by our Board. Our NAV per Share of each type of Share is the price at which we sell and repurchase our Shares. The following tables include the net asset value of outstanding Shares as of March 31, 2024. The following table provides a breakdown of the major components of our Net Asset Value as of March 31, 2024 ($ in thousands, except shares):
Components of Net Asset Value | March 31, 2024 | |||
Investments at fair value (1) | $ | 275,491 | ||
Cash and cash equivalents | 97,585 | |||
Other assets | 8,122 | |||
Distribution payable | (1,890 | ) | ||
Other liabilities | (7,101 | ) | ||
Accrued Performance Fee | (370 | ) | ||
Management Fee payable | — | |||
|
| |||
Net Asset Value | $ | 371,837 | ||
|
| |||
Number of outstanding shares | 14,535,090 |
(1) | With respect to March 31, 2024, at a cost of $271,775. |
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The following table provides a breakdown of our total Net Asset Value and our NAV per Share by type as of March 31, 2024 ($ in thousands, except shares and per share data):
Net Asset Value per share | Series I A-II Shares | Series I F-I Shares | Series I V Shares | Series II A-II Shares | Series II F-I Shares | Series II V Shares | Total | |||||||||||||||||||||
Monthly Net Asset Value | $ | 81,901 | $ | 3,165 | $ | 1 | $ | 285,203 | $ | 1,566 | $ | 1 | $ | 371,837 | ||||||||||||||
Number of outstanding shares | 3,206,849 | 124,118 | 40 | 11,142,749 | 61,294 | 40 | 14,535,090 | |||||||||||||||||||||
NAV per Share as of March 31, 2024 | $ | 25.54 | $ | 25.50 | $ | 25.00 | $ | 25.60 | $ | 25.55 | $ | 25.00 |
Valuation Methodologies and Significant Inputs
The following table provides quantitative measures used to determine the fair values of the Level III investments as of March 31, 2024 ($ in thousands):
Asset Type | Level III Fair Value | Valuation | Unobservable Input | Input | ||||||||
Series I | ||||||||||||
Investments in Partnership Investment Vehicle | $ | 19,108 | Discounted Cash Flow | Discount Rate | 15.10 | % | ||||||
Terminal Multiple | 8.5x | |||||||||||
Transaction Price | N/A | N/A | ||||||||||
Investments in Loans | 18,502 | Discounted Cash Flow | Discount Rate | | 7.77 17.50 | %- % | ||||||
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| |||||||||||
Total | $ | 37,610 | ||||||||||
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| |||||||||||
Series II | ||||||||||||
Investments in Partnership Investment Vehicle | $ | 68,896 | Discounted Cash Flow | Discount Rate | 15.10 | % | ||||||
Terminal Multiple | 8.5x | |||||||||||
Transaction Price | N/A | N/A | ||||||||||
Investments in Loans | 83,884 | Discounted Cash Flow | Discount Rate | | 7.77 17.50 | %- % | ||||||
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| |||||||||||
Total | $ | 152,780 | ||||||||||
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Total | ||||||||||||
Investments in Partnership Investment Vehicle | $ | 88,004 | Discounted Cash Flow | Discount Rate | 15.10 | % | ||||||
Terminal Multiple | 8.5x | |||||||||||
Transaction Price | N/A | N/A | ||||||||||
Investments in Loans | 102,386 | Discounted Cash Flow | Discount Rate | | 7.77 17.50 | %- % | ||||||
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| |||||||||||
Total | $ | 190,390 | ||||||||||
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The Operating Manager is ultimately responsible for our NAV calculations.
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Hedging Activities
The Company and/or its operating subsidiaries may employ hedging strategies (whether by means of derivatives or otherwise and whether in support of financing techniques or otherwise) that are designed to reduce the risks to the Company and/or such operating subsidiaries of fluctuations in interest rates, securities, commodities and other asset prices and currency exchange rates, as well as other identifiable risks. While the transactions implementing such hedging strategies are intended to reduce certain risks, such transactions themselves entail certain other risks, such as the risk that counterparties to such transactions default on their obligations and the risk that the prices and/or cash flows being hedged behave differently than expected. Thus, while the Company and/or its operating subsidiaries may benefit from the use of these hedging strategies, unanticipated changes in interest rates, securities, commodities and other asset prices or currency exchange rates or other events related to hedging activities may result in a poorer overall performance for the Company and/or its operating subsidiaries than if it or its operating subsidiaries had not implemented such hedging strategies.
With respect to any potential financings, general increases in interest rates over time may cause the interest expense associated with our borrowings to increase and the value of our debt acquisitions to decline. We may seek to stabilize our financing costs as well as any potential decline in our assets by entering into derivatives, swaps or other financial products in an attempt to hedge our interest rate risk. In the event we pursue any projects or acquisitions outside of the U.S., we may have foreign currency risks related to our revenue and operating expenses denominated in currencies other than the U.S. dollar. We may in the future enter into derivatives or other financial instruments in an attempt to hedge our foreign currency exchange risk. It is difficult to predict the impact hedging activities would have on our results of operations.
Distributions
On March 28, 2024, the Company declared distributions on the following outstanding shares of the Company in the amounts per share set forth below:
Type | Distribution | |||
Series I | ||||
A-II Shares | $ | 0.1300 | ||
F-I Shares | $ | 0.1300 | ||
Series II | ||||
A-II Shares | $ | 0.1300 | ||
F-I Shares | $ | 0.1300 |
Liquidity and Capital Resources
As of March 31, 2024, the Company had $97,585 in cash and cash equivalents, primarily the result from sales of our Shares.
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We expect to generate cash primarily from (i) the net proceeds of our continuous Private Offering, (ii) cash flows from our operations, (iii) any financing arrangements we may enter into in the future and (iv) any future offerings of our equity or debt securities.
Our primary use of cash is for (i) acquisition of Infrastructure Assets, financing of infrastructure developments and strategic investment in infrastructure-related investments, (ii) the cost of operations (including the Management Fee and Performance Fee), (iii) debt service of any borrowings, (iv) periodic repurchases, including under the Repurchase Plan (as described herein), and (v) cash distributions (if any) to the holders of our Shares to the extent declared by the Board.
Share Repurchases
For the three months ended March 31, 2024, the Company had not conducted any Share Repurchases of the Company’s equity securities. We expect that each Series will conduct quarterly Share repurchases (each, a “Share Repurchase”) for up to 5.0% of the aggregate NAV of our outstanding Investor Shares and E Shares of each Series (measured across both Series) at a price based on the NAV per Share as of the last business day of the quarter prior to the commencement of a Share Repurchase (the “Repurchase Plan”). The Company made Share Repurchases beginning in the second quarter of 2024. Due to tax considerations and other factors, the NAV between each Series will differ, and because of differential fees and other factors, NAV between Share type will differ, but all NAV calculations are expected to be based on the joint underlying economic interests of both Series in the Infrastructure Assets.
The Board may make exceptions to, modify or suspend our Repurchase Plan if, in its reasonable judgment, it deems such action to be in our best interest and the best interest of our Shareholders. Material modifications, including any amendment to the 5.0% quarterly limitations on repurchases, to and suspensions of the Repurchase Plan will be promptly disclosed to Shareholders in a supplement to our private placement memorandum or special or periodic report filed by us on the SEC’s website at www.sec.gov. Material modifications will also be disclosed on our website.
Cash Flows
The following table summarizes the changes to our cash flows for the three months ended March 31, 2024 ($ in thousands):
Cash flows from: | March 31, 2024 | |||
Operating activities | $ | (131,196 | ) | |
Financing activities | 107,510 | |||
Net (decrease) in cash and cash equivalents | $ | (23,686 | ) |
Cash used in operating activities
Our cash flow used in operating activities was $(131,196) for the three months ended March 31, 2024, which mostly relates to the acquisition of Infrastructure Assets. Our net increase in net assets resulting from operations was $5,929 for the three months ended March 31, 2024, which reflects income interest, realized gains and an increase in the value of our Infrastructure Assets and Liquidity Portfolio, partially offset by expenses and income taxes incurred.
Cash provided by financing activities
Our cash flow provided by financing activities was $107,510 for the three months ended March 31, 2024, which reflects the gross proceeds from the sale of Shares pursuant to our Private Offering.
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Critical Accounting Estimates
Below is a discussion of the accounting policies that management considers critical. We consider these policies critical because they involve significant judgments and assumptions and require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. Our accounting policies have been established to conform with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the consolidated financial statements in accordance with GAAP requires management to use judgments in the application of such policies. These judgments will affect our reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.
Valuation Guidelines
The Company’s Infrastructure Assets are valued at fair value in a manner consistent with GAAP, including Accounting Standards Codification Topic 820, Fair Value Measurements and Disclosure (“ASC Topic 820”), issued by the Financial Accounting Standards Board. ASC Topic 820 defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
There is no single standard for determining fair values of assets that do not have a readily available market price and, in many cases, such fair values may be best expressed as a range of fair values from which a single estimate may be derived in good faith. As a result, determining fair value requires that judgment be applied to the specific facts and circumstances of each acquisition while employing a valuation process that is consistently followed. Determinations of fair value involve subjective judgments and estimates.
When making fair value determinations for Infrastructure Assets that do not have readily available market prices, we will consider industry-accepted valuation methodologies, primarily consisting of an income approach and market approach. The income approach derives fair value based on the present value of cash flows that a business, or security is expected to generate in the future. The market approach relies upon valuations for comparable public companies, transactions or assets, and includes making judgments about which companies, transactions or assets are comparable. A blend of approaches may be relied upon in arriving at an estimate of fair value, though there may be instances where it is more appropriate to utilize one approach. It is common to use only the income approach for Infrastructure Assets. We also consider a range of additional factors that we deem relevant, including a potential sale of the Infrastructure Assets, macro and local market conditions, industry information and the relevant Infrastructure Asset’s historical and projected financial data.
Infrastructure Assets are generally valued at the relevant transaction price initially; however, to the extent the Operating Manager does not believe an Infrastructure Asset’s transaction price reflects the current market value, the Operating Manager will adjust such valuation. When making fair value determinations for Infrastructure Assets, the Operating Manager will update the prior month-end valuations by incorporating the then current market comparables and discount rate inputs, any material changes to the financial performance of the Infrastructure Assets since the prior valuation date, as well as any cash flow activity related to the Infrastructure Assets during the month. The Operating Manager will value Infrastructure Assets using the valuation methodology it deems most appropriate and consistent with widely recognized valuation methodologies and market conditions.
When making fair value determinations for assets that do not have a reliable, readily available market price, which the Company expects to be the case for a significant number of its Infrastructure Assets, the Operating Manager may engage one or more independent valuation firms to provide positive assurance regarding the reasonableness of such valuations as of the relevant measurement date.
Because assets are valued as of a specified valuation date, events occurring subsequent to that date will not be reflected in the Company’s valuations. However, if information indicating a condition that existed at the valuation date becomes available subsequent to the valuation date and before financial information is publicly released, it will be evaluated to determine whether it would have a material impact requiring adjustment of the final valuation.
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At least annually, the Board, including our independent directors, will review the appropriateness of our valuation guidelines. From time to time, the Board, including our independent directors, may adopt changes to the valuation guidelines on occasions in which it has determined or in the future determines that such changes are likely to result in a more accurate reflection of estimated fair value.
Recent Accounting Pronouncements
See “Note 2. Summary of Significant Accounting Policies” to our financial statements in this Quarterly Report on Form 10-Q for a discussion concerning recent accounting pronouncements.
Off-Balance Sheet Arrangements
We currently have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Contractual Obligations
See “Note 6. Commitments and Contingencies” to our financial statements in this Quarterly Report on Form 10-Q for our contractual obligations and commitments with payments due subsequent to March 31, 2024.
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Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Our exposure to market risks primarily relates to movements in the fair value of Infrastructure Assets. The fair value of Infrastructure Assets may fluctuate in response to changes in the values of Infrastructure Assets and interest rates. The quantitative information provided in this section was prepared using estimates and assumptions that management believes are appropriate. The actual impact of a hypothetical adverse movement in these risks could be materially different from the amounts shown below. All dollar amounts in this “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” are in thousands, unless otherwise noted.
Changes in Fair Value
All of our Infrastructure Assets as of March 31, 2024 are reported at fair value. Net changes in the fair value of Infrastructure Assets impact the net increase or decrease in net assets resulting from operations in our Consolidated Statements of Operations. Based on Infrastructure Assets held as of March 31, 2024, we estimate that an immediate 10% increase or decrease in the fair value of Infrastructure Assets generally would result in a commensurate change in the amount of net increase or decrease in net assets resulting from operations, regardless of whether the Infrastructure Asset was valued using observable market prices or management estimates with significant unobservable pricing inputs.
Based on the fair value of Infrastructure Assets as of March 31, 2024, we estimate that an immediate, hypothetical 10% increase or decline in the fair value of Infrastructure Assets would result in an increase or decline, respectively, in net assets resulting from operations of $27,549, if not offset by other factors.
Interest Rate Risk
Changes in credit markets and in particular, interest rates, can impact investment valuations and may have offsetting results depending on the valuation methodology used. For example, we typically use a discounted cash flow analysis as one of the methodologies to ascertain the fair value of our Infrastructure Assets that do not have readily observable market prices. If applicable interest rates rise, then the assumed cost of capital for those Infrastructure Assets would be expected to increase under the discounted cash flow analysis, and this effect would negatively impact their valuations if not offset by other factors. Conversely, a fall in interest rates can positively impact valuations of certain Infrastructure Assets if not offset by other factors. These impacts could be substantial depending upon the magnitude of the change in interest rates. In certain cases, the valuations obtained from the discounted cash flow analysis and the other primary methodology we use, the market multiples approach, may yield different and offsetting results. For example, the positive impact of falling interest rates on discounted cash flow valuations may offset the negative impact of the market multiples valuation approach and may result in less of a decline in value than for those Infrastructure Assets that had a readily observable market price. Finally, low interest rates related to monetary stimulus and economic stagnation may also negatively impact expected returns on all investments, as the demand for relatively higher return assets increases and supply decreases.
Additionally, with respect to our business operations, general increases in interest rates over time may cause the interest expense associated with our borrowings to increase, and the value of our debt acquisitions to decline. Conversely, general decreases in interest rates over time may cause the interest expense associated with our borrowings to decrease, and the value of our debt acquisitions to increase. As of March 31, 2024, we had no indebtedness.
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Credit Risk
We are party to agreements providing for various financial services and transactions that contain an element of risk in the event that the counterparties are unable to meet the terms of such agreements. In these agreements, we depend on these counterparties to make payment or otherwise perform. We generally endeavor to reduce our risk of exposure by limiting the counterparties with which we enter into financial transactions to reputable financial institutions. In addition, availability of financing from financial institutions may be uncertain due to market events, and we may not be able to access these financing markets.
See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations-Hedging Activities” in our Annual Report on Form 10-K for a discussion of the Company’s hedging transactions.
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Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
The Company and the Series maintain disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s reports under the Exchange Act is recorded, processed, and summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. An evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q was made under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer. Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is timely recorded, processed, summarized and reported within the time periods specified by SEC rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Controls over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recent quarter, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Management’s Report on Internal Control over Financial Reporting
This Quarterly Report on Form 10-Q does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of the Company’s independent registered public accounting firm due to a transition period established by the rules of the SEC for newly public companies.
Certifications
The Certifications of the Principal Executive Officer and Principal Financial Officer of the Company required by Section 302 and Section 906 of the Sarbanes-Oxley Act, which are filed or furnished as Exhibits 31.1, 31.2, 32.1 and 32.2 to this Quarterly Report on Form 10-Q, are applicable to each Series individually and to the Company as a whole.
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Part II. Other Information
Item 1. | Legal Proceedings |
From time to time, we may be involved in various claims and legal actions arising in the ordinary course of business. As of March 31, 2024, we were not involved in any material legal proceedings.
Item 1A. | Risk Factors |
For information regarding the risk factors that could affect the Company’s business, operating results, financial condition and liquidity, see the information under “Part I, Item 1A. Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. There have been no material changes to the risk factors previously disclosed in such filing.
Item 2. | Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
None.
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
Not applicable.
Item 5. | Other Information |
None.
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Item 6. | Exhibits |
The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.
* | This exhibit shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such exhibit shall not be deemed incorporated into any filing under the Securities Act or the Exchange Act. |
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
APOLLO INFRASTRUCTURE COMPANY LLC | ||
/s/ Yvette Novo | ||
Date: May 15, 2024 | Chief Financial Officer | |
(Principal Financial Officer) |