AINV - Earnings call transcript Q4 2019 | MidCap Financial Investment Corporation

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Operator

Good afternoon and welcome to the Apollo Investment Corporation's Earnings Conference Call for the period ended March 31, 2019. At this time, all participants have been placed in a listen-only mode. The call will be opened for a question-and-answer session following the speakers' prepared remarks. [Operator Instructions] I will now turn the call over to Elizabeth Besen, Investor Relations Manager for Apollo Investment Corporation.

Elizabeth Besen

Thank you, operator, and thank you, everyone, for joining us today.

are Chief Chief Hunt, Investment Officer. call Powell, Officer; Chief today's and President Officer; on Howard Executive Widra, Tanner Financial Speaking and Greg also call that recorded. I'd advise are webcast being today's to like and everyone note and any strictly Corporation prohibited. Please Apollo form in that they property unauthorized are of that Investment any broadcast is the Information audio this of Earnings replay about our Release. call Press the is available in safe like I'd regarding your harbor customary disclosure call the Release in to also forward-looking to information. Press our attention statements. forward-looking include may webcast and call conference Today's

Forward-looking uncertainties, future to our prospects statements and statements as business the limited involve but not companies. risks including, and portfolio to results, of our our prospects

our posted make. financial should refer about to turn update remind do forward-looking risks as over I'd this website contains and filings, for call information our copies not as statements You also reports our business the please financial www.apolloic.com. required I'd SEC unless our or obtain like our time, our we Widra. which to that To may and any by At the We to to on shareholder apply Company's of affect the law. supplemental to statement package a well undertake Howard that like at adversely website, projections registration statements visit we performance. portfolio, that to everyone information forward-looking

Howard Widra

investment results our Thanks, Elizabeth. of quarter, the for followed couple financial I brief I the of by discuss our execution a will begin update highlights. of today's a call will by overview business an on then providing strategy.

our an Greg fourth will Tanner greater market on investment quarter activity will financial update discuss detail. in credit provide the on remarks, my results quality. will then review Following and environment

questions. open the call We will then to

quarter-over-quarter. share. with manager believe losses impact financial XXXX, investment activity since the investment the of interest the asset the incorporates will overview share at April The origination the realized incentive unrealized increase as the and per per dividend greater Net an incentive quarter. per income was driven now we fee quarter accretive the alignment during Net the the the increase our call. of excess enhances results detail Let well Net impact for in appreciation shareholders. a fee was from portfolio. was benefited period, in of slice as in the NAV net of our $X.XX with which later partially buybacks earnings value end by the share structure change begin strong of stock $XX.XX discuss $X.XX me fee income by of and encouraged for a a March the the Greg of our the calculation change offset in X, of structure, interests in

ago April pursuing asset in As leverage availability the business equity. XXXX, increase requirement a to substantially credit reduced the our asset us reminder, small in a coverage Board the coverage minimum approved April our above reduction ratio to which our Directors XXX%, allows Accordingly, act. from one-time XXX% effective of year XXXX, Company’s was to X,

profile this to new the Platform. to reduction points. X.X Because rate X first Direct shows originated of to to loans We XXX to to Apollo to the minimum equity increase the past first senior the of incremental we’ve during XXX volume the target of ratio We the the in by with times floating lien invest investment last effective normal capacity provide market which progress of times. made we’ve basis range we’re with take like given rate loans and times we X.X briefly note, in believe use of risk to that On accelerated over year became AINV leverage asset highlight of the periods improvement of a floating robust our Origination generally in profile. a debt coverage I’d opportunity discussed As loans unique portfolio. moment and ability intend lien of some leverage X.XX targeting month the in believe past, with to conditions the our to spreads origination

XXX The basis front, lending The portfolio first XX% origination a Origination rate by the the average investment increased On portfolio portfolio has At activity year loans Direct lien XX% XXX of ago. year points down weighted corporate spread in end first lien decreased rate the floating from a portion the points compared XX% a assets floating March, Platform. on ago. Apollo ago. corporate of the focused to basis sourced to a loans to XXX% year the of represented lending up from

other We maintain relatively small also hold Apollo with funds continue by us in and us larger to which advantage less allows co-invest are which to our entities competitive on typically to managed of allows balance deals ability which sheet. to our participate take sizes

to major pursuant at to in ago. other allowing to be with year Our increased us the participants. portfolio on our other order lending ability continues entities end corporate up of Investments March a market with advantage XX% compete co-investment co-invest XX% to the may to Apollo from

from midcap We life with three initiatives sciences' a ago. of finance, XX.X% financial the has the end capital to lender assets on at deploy asset-based areas up in March significant year barriers to entry X.X% in represent expertise. of to continue lending portfolio which These

$XX.X to corporate year manage from $XX.X continue average exposure a position to decreased We million borrower sides and concentration ago. also million The has down proactively risk.

on portfolio. plan our previous Merx, the as exposure reducing outlined we to includes to XX% calls, Merx to total Regarding of our XX%

XX.X% investment second its from million net $XXX a $XXX $XX us During AINV’s from on the portfolio quarter, the to in XX.X% the approximately allowing million, bringing of million reducing to it basis priced portfolio. Merx to AINV aircraft securitization down repay Merx of

our credit the exiting much better all end Additionally, assets exiting focused March, structured We legacy the it position. was ago. we continue our short, than make non-core Non-core and exposure of at year a to or down remain portfolio assets on from portfolio we is year a the reducing of XX% ago. today XX% positioned non-core represent progress believe of to exposure. including prudently remaining In

We allows typically blackout present us on the shareholders. repurchase with our window added Since NAV an we outstanding, to the has have to deliver Company continued We stock end during both meaningful of discount the to to to below share. current open repurchase NAV. be plan program stock. through for during repurchase portion currently shares to should buybacks $X.XX our repurchase to equity end periods a organization. repurchased opportunity The our of Moving value which or XXbX-X NAV million authorization we and which $XX.X We our believe repurchase of component periods. stocks. to the continue attractive per our approximately as to of the of consider what inception to stock market stock to intend quarter, share the allocate plan, it generally a has us we we continue March, of at stocks XX.X% repurchases Since $XXX.X initial and shares million under repurchase available to a approximately trade had our

call $X.XX for and the record XXXX. share that, to approved turn XX, to course. over activities environment Turning the to of our shareholders market as a has distribution the board With Tanner discuss June investment to the of I’ll our distribution, per

Tanner Powell

margins largely Thanks seen volatility have recovered in from Howard. December. the Beginning with the environment, the credit current market

lending a of of quarter. lending years broadly Away the during issuance due generally the loan the loan private end at specialty The new lender the portfolio recovered market accounted and our in prices XX.X% syndicated amount loan less the markets lending, corporate from and sciences, remains in have asset-based continuation retail decrease to life competitive outflows. well the the despite as significant tremendous capital for raised as few highly traditional Secondary are over sponsor-backed debt competitive March. of last finance the of areas

sourced first investment During the Platform. by senior on rate activity quarter, the floating Direct lien Origination loans Apollo focused corporate

and $XXX New million and $XXX were a million respectively. fundings investment commitments

net New new spread as average commitments $XX XX which X companies below our These is X.X to XXX of X.X within times points loans. was our points, incremental lien the size for commitments average of were target portfolio The for new XXX rate comprised commitment XXX commitments assets. weighted target range commitments times. over to an just leverage across LIBOR basis entirely was basis million. first The of of range these were new for the floating

made our order. Lastly to XX% co-investment were commitments pursuant new these of

strategies. investment Solid of volatility remaining restructured repayments were and in repayment the $XXX activity and investment exposure $XX exit totaled assets funded XXXX-X more our eliminating of one access our quarter total $XX totaled resulting December our of a million. credit included non-core the of investments net modest. in million to for $XX craft in million million Sales Sales

non-accrual. on from We Crown also the during period, investment received partial Automotive repayment an a

of addition, revolvers Merx. $X received net In a $XX net from on and fundings million million totaled we repayment

Let to of by the quarter a portfolio current million, of today. end the our our And on of in mid-XXs we and quarter, leverage activity. excess $XXX brief times the net with be ratio been net increasing me to a growth an provide update our X.X over quarter. as has the of first Since investment the pipeline, expect end

down, were discussing Automotive. placed minutes X.X% to the the portfolio and the spend decreased investments the status X.X% non-accrual repayment from from last quality. non-accrual period. overall Investments a X.X% last down from me end investments cost Crown No of on March, the let value, At from of status Now at represented partial from fair non-accrual credit few quarter due quarter. during X.X% at

I our efforts leverage commitments average to X.X earlier, reduce The as turn X.X borne X.X times. net Greg, out some performance in X.X improvement But the weighted for mentioned quarter. of weighted times. times. X.X down times times to to I credit Our leverage our interest point by average the who investments new are portfolio the call the on net X.X will metrics. to increased X.X The now decreased The With profile continued attachment to average financial will decreased was during coverage that, over our discuss from times down the quarter. of the times from risk

Gregory Hunt

Tanner. Thank you,

an performance our like we Before remind to detail quarterly we Merx's think you help evaluate and also as about to of the portfolio. are financial our included with within our will corporate to discuss risk you more to that to I'd mention our statements financial better which XX-K. reduce supplements like the execution exhibit financial we performance, that lending our I'd provide portfolio, provide plan you

the securitizations that that include investments with will the two financial You sheet. balance the from held note on previously consolidation statements Merx of were assets

strategy, million on credit Moving portfolio year-over-year, approximately XXX X% passage on or and as quarter-over-quarter grew approximately small our the actually. XX% to repositioning portfolio availability by or we execute continue of by with core our million, $XXX the

lending, up corporate quarter-over-quarter. corporate includes positions portfolio in which XX% portfolio the of at and and is corporate end represented in XX.X, total ago. XX% Merx portfolio, portfolio Merx, the lending XX% the March, year rate. core floating first corporate of lending of Our lending of from XX% the book yields is lien, down Weighted slightly lending a is XXX% on the average corporate XX%

share $X.XX compared per at the increase quarter. Our cadence net quarter compared our share for end the December. was end reflective March $X.XX investment leverage the times to of the investing December income at X.XX the during quarter. of X.XX for times per Net of was was The

of at X.XX share Our of December against slightly leverage added increase versus per per income portfolio investment we share X.XX was a as December, $X.XX quarter quarter repurchase our XX.XX of XX.XX $X.XX dividend the activity impact end quarter. offset rose times, the depreciation. by $X.XX NAV of to times plus average for share, during from up the from the or net the a

Net million fee total declined in and expenses XX.X portfolios at lower quarter, was million and billion million the X.X income to declined growth Turning quarter offset to March. partially end to primarily of interest to fees a quarter-over-quarter. X.X the the December from which as income result expense were as XX.X compared million, due income million down prepayment Fee X bridge prior over statement, million. by the from fees the increase incentive income in income by an XX.X the prepayment of for were XX includes down by investment

requirement ago, The effective fee reminder, on the rolling that return year with April the X, back XXXX. became total As a provision a X, a total revised look -- with include our incentives beginning we XXXX. had quarter January return calculations calculation the incentive announced incentive XX been fees to a

fee the For XXXX, was the feature. include April the flat total and did XX, period incentive XX% December return X, through between XXXX, not a

quarter. As net paid incentive unrealized a result March both X, and of April incurred losses XXXX, realized fees the since during were no

quarter-over-quarter. interest was X.X% average average on weighted rate debt flat Our the

grow cost we of credit as our facility. average forward decrease percentage the given portfolio, revolving we lower Going utilization expect weighted the our higher

credit $XX million to new to largest gives liability the and their up same our the $X.X our added of banks Regarding our we’ve existing facility facility with one we time our extended the trillion bank's group liquidity manager group. million quarter at industry’s to revolving now during an which structure, the additional $XXX five commitment added while

now operate higher additional leverage is the With the the we The end enough Apollo additional of of range. funding capital commitments, leverage being part from the of received our reflected AINV benefit to have capacity platform.

program purchased of a of XXX,XXX our questions. has shares repurchased a total for call XX.X% And a stock Since price during purchase gained total end million approximately for and we since an prepared the for quarter remarks, have additional concludes for an $XX of we $XXX,XXX. now $X.X million shares million. we a buybacks, The through regarding cost cost repurchases. average operator, in repurchased of at $XX.XX please cost of Lastly This shares XX,XXX average exception of the our an total share quarter, price open million. XXXX, the available or outstanding which we Company yesterday, at $XX.XX have $XX the $XXX and of for stock

Operator

[Operator Instructions] question line from of Jeffries. Kyle is Joseph Our the from first

Kyle Joseph

my and afternoon for thanks question. taking good Hey

quarter Just on that activity wanted you at has year? volatility end? the It sort to-date. like to guys remained of end repayment strong for guess talk give an of us Is pipeline. have solid update you the the normalized quarter of the a last after of sort sounds activity Can sort I investment about and

Howard Widra

so we’re now and I mid X.X the to by -- -- we quarter, What of we end X.X around quarter mean, ended we about and X.XX around net. in have expect the the right times XXs be to that’s the

than good this levels higher a probably quarter. Our origination are little bit

whole so, past lower are they but cycle, repayments than the probably to And more still will this be than on average quarter.

bit So, probably little it's still muted.

Kyle Joseph

I spoke, think you’re perspective both us any to about in a since a give from people's changes and an have bit. expectations strategy? you've asset changed And you last thinking how of interest for Could sense rates that liability terms

Howard Widra

incremental point at our loans our is No, to I this floating be going are mean rate. rate. All floating debt

so, the rate that -- any do going of rates down obviously calculus each go fixed debt time with fixed interest it And and changes maybe have we’re rate to to we may and overtime callable. regard our

interest go the of So that only it lever interest that’s risk. and but to as we as change gets the well. equity Obviously, sort our rates down strategy little up won’t But trying place, sort return we’re of rate down, bit. goes on eliminate when muted more, the a

Tanner Powell

to we're would Kyle but back as thing mitigate add the some the add one our declines. try LIBOR as had that to they to back add I’d and increased, there rallied interest rate to help Yes, market trying feature floors which mitigate decline, loans, leave had possible, of where to LIBOR to potential something a that help or started we to

Kyle Joseph

helpful. teen just terms one Obviously, the of you were Sure, credit. me, in us last this And year? sort changes an thanks. quarter in seen Then give update trends of you're you've from stable EBITDA revenue for NPAs and seeing any of companies? portfolio guys. your a on That's

Howard Widra

Yes, sure.

we past, try number. disaggregate. think in of organic take level a with try to rewards, it's we realistically size I at the an do underlying acquisition we've sometimes, the to discussed as get to activity to best the sample and tough and So our But

we what's firmly that absolute try disaggregate were comment disaggregate certainly that basis, growth to holistic and organic, an that to immediate revenue I still kind think adjusted what or but another that If high-single-digits. if of less is number, to basis, than the is we on EBITDA positive.

quarters. lacking with, one might it moderation think at more of think margin our to to issues, whether I I'm still Probably the speculate, those recent level underlying if as of and we're saw I some have be from takeaway pressure there, some the fact to costs, with certain cost year-on-year of of had the do difficult some a of tough, commodity and than speaking comp. which pressure do it more has basis, we that these but maybe so we investments, lacking less wages,

Operator

question line JMP And from next York Chris of is our Securities.

Chris York

thanks my guys, for Good afternoon, and taking questions.

want So of with to life questions couple I begin lending. on just sciences

So as prepared in healthy Howard, you it active year-to-date. opportunity the to been seem set, because of origination appears does remarks, that of attractive and in life loans quite that mid-cap has And barriers. the said their sciences

and total today want a So to size as the sciences percentage loans about the max is would the have question represent you management portfolio life I maybe portfolio? of

Howard Widra

we Well, of us the science life pristine to would our about over going into performance circumspect describe sort capital It keeping space sort most been big, and has time, only right. that for asset competitors. people be some too our in means that so as category, the direct with the is of mean, view it key credit markets I which structure, for that, aggressively is to which the

opportunity as the being. with comfortable probably this large the as add we the not to space is even loans be percentage portfolio it So, that would of in

do parts as could that make of In part potentially they're to of loan be bigger the loans Apollo fact a portion, whatever addition obviously, even well. we if them

XX think we be billion probably we're XX%. that if we moving there, If life be $X towards products the, broke So, would the for BDC, XX% portfolio. sort what we to said a to We'd portfolio. the AINV, XX% be XX% down, got before happy what and for we our very of sciences that to base products would all sciences is like leads we to asset to have is the of life

to be market to life getting it more be anyway, portfolio. us for That, be sciences than to see hard-pressed big I'd get much would be that would the that all together? enough So -- put does that $XXX million a able

Chris York

asset of XX So portfolio percentage I basis. had on to XX kind knew based you to

your the environment with those am following So as up on then helpful the Has And for because mean, and XX of your business affected of life as sciences. that to kind your I recently? very area." and entrants that I set competitive this then or that partner is vendors They're maybe one XX helpful well. from "newer XXX in million very opportunity is I the just having

Howard Widra

not even interests Well, lenders I'm just debt. do equity. a in sometimes not people for with first were all, equity what competition very debt on deals directly aggressive We're, is always these the because round, of our certainly sure are where additional to competing of we're like they competing lieu on with with competing

someone either capital So and to part comes us, so debt they're going raise. they're do a of to preferred, to as a or broader and going do

are are we there of people of entrants providing more said, companies venture So there and ago, X it. that if look you the today just doing new in these in years versus or market. are That X capital, debt market the at the ones type terms more as described market

think more I is The having been long there some so market time. I'm competition. And a combination in for the

market So profitable, don't provide having we really as And us the because hasn't, of combined these which which more revolvers it's people if of it's can bit they to and if the we things of for but balance people a good, as is they're provides commitments, they're there I a But they're have the if importantly, which not revenue early, often Because equivalent, say bad not what we companies that that moves little sure, one. with revenue good which company there need the and things a some they're more if changed do have, so two don't good. available. couple it flow call large wouldn't combined relationships sheets versus do people allows they're that a sense with sort of of and protection set base competition not even established grow good of have as there's good actually has in I not growth, to But do other lot our can us with and share in can XX-day. make is a We competition. market. fact see hours probably

Chris York

color. Great

I be side, then clear Just SVP from entrants? was of to my and newer Blackstone speaking

Howard Widra

forever, business of there we right? has lot a I SVP been with mean, do them.

Chris York

so, then It's fundraising. different. And one okay. little bit organ last And now once genesis was on a

in manager guys are currently or benefit So, fundraising help funds SMA complimentary fundraising co-investment? that any strategies either considering direct could private AINV via or a you lending as today

Howard Widra

Not are only sort and But in of we been. the our of the -- coming release raised SMAs of type AINV soon. we and in is done publicizing in origination mean sort will of of or investments is aggressive about actually sort very type size are But billions dollars that assets I again. the across probably invest direct of we board. we platform co-invest of that same that of haven't have that

So in to million it $XX continued take seismic for something the team speaking as that $XXX sort a for of board. across million a whatever million-$XX sensitivity diversified we enables and cubic are of

have past that’s to able we margin significant months SMAs intend transactions. our increase in ability XX the to and serve over continue So to be raised

Chris York

cross lender I very helpful question and some other heard direct SMAs raised and Got some being the releases hadn’t seen sales any of like most just I were my it so…

Howard Widra

under because $XX in itself and just space had Yes have so – so we’ve mid But figure we entered management watch the talked right been we to future. a near it will especially people cap billion through seem that we we we improve because of in have much present. commitment cap public know we business about has this transaction mid we

Operator

coming And Morgan. our next from question Shane Rick JP is from

Rick Shane

afternoon. this question for Hey guys thanks taking my

little fair migration you non-accruals about quarter-over-quarter talk the on what basis. were the they down value wanted about six to And three how feel next the a Curious cost of and Just there? over do non-accruals bit, to a moved months?

Howard Widra

repayment the is changing on automotive. that sound levels in obviously, Yes, a denominator little. so just absolute movement partial we but that we're terms down, of the received Bit

pretty to go that that economic to a continuing focused it pretty saying about, without a like yielding speculate to bring we benign names resolution the assets. Obviously, most to difficult still speculate top a reinvest it talked will are but these As we’re on we trying can there. environment and in such to movement, relates that

Operator

And from James. Raymond our next Dodd is question from of Robert line

Robert Dodd

if that incremental competition. much quarter maybe ask see certainly mean couple and in next a de-risking? does forward then, sound kind cash given I XXX question trend Hi lien lower the competition quarters of last we the and incremental I how When average about than your the flow can is first its on of Can to lien this you on the incremental mean XXX on color point Obviously, before at versus guys, insight. of one is on quarter we spreads that. look XXX and first look assets I give last us your at which and any

market So, I deliberately is spread versus mean, movement that de-risking how much competition? of

Howard Widra

to over basically is term that the of it’s until not need to level to and XXX. year, we which not certain screen long so one go This the view of Xth April with do we between we XXX able a have this probably either. one dynamic were it’s So, of that lever

higher end of to April the if basically knew the things that run not As will. up the increased we of range the in all opposed and just sort limit, funnel origination we as range sort got you were the we that going of closer to to include to against

of range, just already expect origination in which is for end lower to you in level more would this area So, say the the with the slightly over this level. of off is next quarters to that that it

at not changed the overall. what really different, we're regard what why the hasn't BDC this result, choosing is than you're why doing now and because it that's it's a So little is expect we're what see seeing about different to you why good that you quarter, platform to to we're worried but actually the we're growth ceiling. do market quarter. growth current the That's telling not wasn't this to seeing, really we that already we're That's with the the continue doing as saw in

Robert Dodd

it Got you obviously it. a in low if lot kind the that, towards XXX and is or dynamics, more up obviously open when up point, lower of well. I'm attachment that I XXX just incremental lower with to see of realize, as the I high say you the that that ends lower of range, then average be on attachment as will opening When, fair to would end, may was We to mean, that other and there's de-risking on portfolio be points implies potentially well? attachment your that

Howard Widra

of interest you see interest hold leverage, what seen, aside of credit you that's should in incrementally that that's all those you because should obviously, see, de-risking but average also get Sure, the granularity, already the size have Putting that's the should terms portfolio, average, better. the lien percent rates metrics. average, the of first

Operator

from Testa Christopher of National line Securities. is question next our And

Christopher Testa

non-accrual guys. know led modestly, the the floated up in my and was very increase. I Last volatility HI, good liquid just to questions. for prices now decline and had taking Thanks NAV that you're evening, quarter, markets although

way down that companies a the have significant So, where there marked during issues some quarter? are that idiosyncratic in some you

Howard Widra

the It Most last markets. was last our liquid from quarter quarter. not. down of not No, was

Christopher Testa

Okay.

Howard Widra

the this in was you then there the have down not XX to of quarter-over-quarter that se, bps. extent was somewhat impacted the the on per very of second those lien, marked was that the have probably but go you from primarily in than lien, XXX rebounded XXX syndicated less strong second book was because about off million by we was in were quarter that that Right, that's say, market, quarter second also kind on let book of our if probably the XXX during that closed to market investing okay. market, syndicated of and really drop would in a lien. to a back, that quarter, bps September valuations. Say one remember in that our And XX impacted basically say And you comp. there We

recovered to have that we and extent. So not

Christopher Testa

it. Got

Okay.

go that paper don't towards to you almost your call towards And comprises we level? assume current you X.X the least, composition know, comfortable sort if where today, of of at helpful. XXX the guys, at times, you I the obviously it the to ability that's leverage end Or given portfolio should get top target, is of the that the Now, close to the XXX you'd portfolio that range? be look before have at XX%

Howard Widra

right, No, okay.

So, the to new all this is what similar would XXX seeing to simple XX go to to say, quarter. assets in from, thing you're be

whatever X.X, number. incremental from million it that or us XXX assets, So X.X takes all X.X something is like in today to those

addition, our would that absolute is sort an basis. an -- hope to to modestly absolute we're core though, on shrink we getting on another Merx we're and climbing In assets as getting we're basis, shrink of ladder,

also then then day. of so that, And the when so the at end came through, the picture there's

core And like You'd portfolio look in the corporate have looks that. obviously Merx, XX% like you'd and metrics of things XX% less have this bigger data. it today But percentage terms to you'd markedly of assets. then it's have much

Christopher Testa

bit And on the interest little Merx.

portfolio company optical then you're maybe have on revisit and that's, earlier, might forward? job a going And and portfolio. to something response good you something single you're your You portfolio targeting co-invisibility. in that But could portion the that it's you're of Chris great. you a said you it's that have have raising I just a increasing a But have that's money valuation, question you with as mean, done potentially to to XX% diversifying smaller weigh done more the in XX% understand and great SME, the its Merx, you of think I do guys York's more name,

Howard Widra

to last address so your because be order We that also call, there, next as changes the at sort advantage the been about question off a once question. that of couple that's made to of created Well, take but no non-core able our value right. in That's of we we assets. we there's moved just, question, talked

Okay.

bathwater. XX%, XX. one And, a don't throw be do targeted assess want of it this to we have to could You that, aware how less, so concentrated we're we But but ultimately, baby that risk? out with I was the position, XX the it

of the power on capital Merx, we party reasonable raise which that hopefully platform money, but build to for of a So focused that the will the the what capabilities servicing portion retain shrink income, using there. us, third is

platform getting we is with off our focused the hope And luxury like is think worrying sort having money ultimately in quality be off we'll we'll so Merx focused we're we the on value we're see again. answer small eye and our enough to then that. the other there third-party a on feed the improve of valuation But stronger in sort asset what the level have of question long-term of Mark says have getting feed things. the our some on about of I nobody not yes, Apollo creating some when asked that the of So valuation monetize servicing raising and combination that so

Christopher Testa

and just only And I credit risk. last data one, if I for basically taking rate really floating you interest mentioned may, that forward, know looking had risk guys the rate going you are not just

revolver, a the you of certification, has? on it platform and branding guys is largely the obvious obviously lien first something given from evaluating doing middle Aside the personal focus are the market

Howard Widra

that I we're going exact a may we mean, issue I of into one mean, that are sort is there. the are certainly tap aware. these larger assets Yes. of CLO

So in we for alternatives of benchmark have terms exactly what would definitely work are. what the the

a the to we do related cheaper definitely a earning leverage capacity on have what we costs aware have. in expect in short all because we is which any, on cost. unused And certainly there's necessarily of it's our line higher would time because to different commitments of, we're if much wouldn't that drawn us thrive vastly is only little nominally So, not power have something that something I it CLO

which sort -- issues of we us have have, they execute. best first. added so So, the often we at had something we it's CLOs can CLOs execute, like are sort expect do at platform, we if of execution they what middle people and Basically is see the we of that can available look market feel

Operator

Casey of Point. Alexander line the Compass from comes from question next Our Instructions] [Operator

Casey Alexander

afternoon. upon total going eliminate it’s looking would Yes, hi return good straight just the forward prior know from long Based incentive forward how this fees to you’re requirement losses quarter?

Howard Widra

it’s this, look at where at looking take I you of you think a mean, at a can I current we take from a Casey, -- kind forward. XX just look are. Well,

I from think You that, can million. accumulated they’re at $XX losses the look about

multiply can You that the kind rate. incentive of

weight our a without about any our so sense that are of quarter million You run is, earnings can $XX so what a get losses.

kind a fee quarter. from probably into that losses, a benefit $XX carryover gives the essentially if number So quarter million but the take versus in via of] move of credit forward, that have we [bit incentive next you will that’s of that carrying out of then kind kind our some third of

million, we million of So, $XX is million in XX% credited was quarter. first $X or the million that that and have $X $XX of

is it million So a million $X the another four I performance there what else $X.X nothing there’s of if second quarter. -- don’t quarter. is in still If benefit to changes – this know

Casey Alexander

assets, were Thank no any mark-to-market. Okay those oil, the relates assets. If of no that’s and what it you. I than as there looking was regular those hearing in for. right, energy was movement I'm tanker of There to other non-core exits

Howard Widra

one There very is meaningful dividend on to in that’s small We next more progress the quarters. have of a them, few correct. hope

very still next quarters. I progress the like it over we’re on focused feel -- make to hopeful of We’re real and couple mean,

Operator

from And Wells from next of question line Fin the our O'Shea is Fargo.

Fin O'Shea

afternoon, good for my questions. guys, taking Hi thanks

are the Are accelerated lower pretty the markets risk segment? seemingly first the in form about for maintaining Just those on, moving more assets, of shift spread, more on some presence being? now Or or into completely you higher one lower forward, you time Can of kind we areas? straight higher kind spread opposite, talk have you senior of leverage.

Howard Widra

strategy of of execution AINV out think this period extended it not an we’re forever. an of there’s time. investment mean type that I for look, for We Yes, requires

risk appealing sense right in market are investors of because So, yield metrics out a so not stability. now up get reward credit held to is just us whack. of proposition that the there, even The even might though

definitely they're times we some of make see to we a [about] even So, if there solid. And platform, lien company decided looks and win time, we them when really are do and all second them sort on deals we on that that occasionally really those BDC, the choices. the stable do would do, the at

need it. order of sponsor So, second lien, would we active world a there really every to sort contemplating almost do in they're that tranche. in to in never continue be the see But, to sort much case because I'd that isn't a space, opportunities, also unit those of of say a in contemplating where someone's

at so, And options they're those across deals. looking financing

one to points but of to you get first to some solidly as think, we and very we much wouldn't should we very set not of potentially changes, want or the that you sort at as opportunity, be shocked, then I it So, table but expect could -- the and if market saw certainly it, the see stabilize we fit before point.

Fin O'Shea

for platform. the you and more the color just one Thank then and there on BDC the

we toward a BDC. any it vehicles the of that Apollo look about funds into kind vehicles of see private bring so line? something array your of platform going you many peers is think hopes direct to the the all are to good not So, Should have have to permanent think world's like down under your you or pretty the lending something and, of can that, capital, as going to or into intentions we

Howard Widra

of of You as a BDC. JV like need as part the

Fin O'Shea

the to merge BDC. in To

Howard Widra

I We No, of say or make even down mean, medium the never. sense I may that's but would I imminent opportunistic. road seems think certainly potentially term. don't that Obviously no, Yes, sort so. do anything never mean, nothing that

Operator

James. question from And your Dodd follow-up a Raymond Robert is from last

Robert Dodd

on the mentioned last averaged obviously, corporate Hi, bar I exposure of just literally the [indiscernible], one. average is the on mean side. you actually you debt -- follow-up have

a it position, X% about year a a about half one ago. a it's was and Now

well. With put so that you've you can the SMA pockets cetera, more capital et got into as

down another to diversity level and another -- de-risk. to layer as adding more bringing you potentially and, further even So said,

So you if term AINV? target, size long what your average have of one for on kind is position

Tanner Powell

alluded bigger kind right the good I that earlier, directionally hopefully percentage that but you the the post assumption. a operating that X, the sizes, Howard alluded idea. origination think slightly of we number that's and Yes, hold think $X continue will X.X going to net we to billion positive mean to approach naturally I is Clearly, to X% same and as

just appreciate in thing, for other second this is to The to interfacing you type certainty counterparty expand could you're of with is the on probably importance. paramount that market a of as

the as at the We overwhelm is gives X% AIC especially comfortable, additive. that at So opportunity would us they're as to we more the more commit think it the of a that certainty, deals that we don't AIC the opportunity. incremental bigger that broadly necessarily and cannibalizing availability provide, type such is because raise look capital look level of much not that to number

Operator

to remarks. now over management back the And turn I'll call closing for

Howard Widra

free you Have we you On reach out any and you. good of to Please a your your today behalf time the continued if Thank team, thank questions. for of feel support. have any to us, night.

Operator

you Ladies and our this today. greatly it. thank for We conclude call does gentlemen, conference for

may You disconnect. now

MidCap Financial Investment (MFIC) 16 May 192019 Q4 Earnings call transcript