AINV - Earnings call transcript Q3 2020 | MidCap Financial Investment Corporation

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Operator

Good afternoon and welcome to Apollo Investment Corporation's Earnings Conference Call for the period ended December 31, 2019. At this time, all participants have been placed in a listen-only mode. The call will open for 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 everyone and today. joining operator, you, you for for us Thank

Hunt, on Widra, Chief President Gregory Howard call Investment Financial Executive and Speaking are Powell, Chief today's Officer; Tanner Officer Chief Officer. and

recorded. this Corporation everyone is advise strictly any the call are they to to Information like any Please release. Apollo call your unauthorized audio about of that is press that customary like replay Investment I'd our note of form regarding that forward-looking and the in prohibited. I'd in today's to information. also webcast disclosure our call release being available and property attention in are earnings Harbor broadcast the Safe press

may forward-looking and call webcast conference Today's include statements.

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

shareholder our update of unless statements risks and law. copies may our adversely and You at affect our To please our www.apolloic.com. required do SEC should undertake website apply statement We business forward-looking reports or visit refer obtain projections to forward-looking make. statements not that for any by registration filings, that our we to

a I'd as Company's website, everyone remind like we financial the that performance. our financial also package information well on which posted about to information the contains supplemental portfolio, as

I'd this Howard to time, like At to turn over the Widra. call

Howard Widra

an years. by with of quarter. progress the Followed over of for call past review begin a you, today's few I'll Thank Elizabeth. we've made the the the overview results

will our results will up for an to on will the provide detail Tanner remarks update review then the investment will financial Greg quarter quality. call my discuss and greater open questions. activity Following our in credit also then

corporate several progress a the we've loans. years, and rate first of de last building risking lien significant floating the Over well-diversified portfolio portfolio made

evident is by credit metrics. our the progress improving Our

from X.X lean average compared Over times XX% example declined of times. our attachment this in weighted period, first X.X to corporate is XXXX. portfolio XX% has our loans For lending June to

portfolio in much more as evidenced XXXX XX.X granular, borrower decline exposure corporate by our portfolio million June is from the average today. XX.X in Our lending to in our million

reduced volatile and have assets on legacy We higher more spectrum have the our noncore significantly and returns. risk which exposure to also are

XXXX, million from end the million assets repayment of the the legacy of June XXXX legacy of assets $XXX XX% billion. over noncore noncore totaled period. sale and declines. At assets end this $X.XX legacy proceeds Net at and approximately December total $XXX total noncore At

shareholders. of or to seek for value our remaining our restructure maximizing the noncore We to ultimate continue monetize goal assets with

take asset we last Additionally, years and requirements. regulatory and a advantage co-invest over the able coverage important reduction been release few our relief to of exemptive two to

within rate platform ability floating given The our target are significant Apollo to use the to director originates our loans, relief amount origination given and senior which are AINV exemptive leverage. range spread more available of

Given AINV's our maintaining to been we participate ability to on sheet. in while balance sizes able co-invest with have commitments small hold the broader relatively Apollo large platform,

outstanding, the lower approximately have this small of assets risk billion commitments. billion the we of those of when performing. risk lending portfolio diversified a approximately already necessary rate funded, all lower are us strategy billion corporate made began which granular it business invest In are portfolio reduced has release implement regard are AINV April XXXX, act, in a growth fortunate addition, asset to allowed coverage $X.X all position of currently in lien to credit In commitments have a of be the the this $X.X requirement. since $X.X to of floating unique availability when first build adopted origination to Both to regulatory prudent we new following of those passage was loans.

shareholders. our fee our total demonstrate number our we any our implemented incentive value have we requirement, including In return changes May announced of commitment and XXXX, shareholder friendly which week, actions calculation. to so a fee for Last to creating structure

fee also equity. in management times lowered We of permanently management debt fee and X% excess to to our one X.X% further to the on assets reduce

Second, that stock of accretive when at repurchasing believe buybacks trading is stock a discount use stock. actively are been We most meaningful that. AINV on is the capital the shareholder

the board $X.XX Today stock AINV of has combination authorized million repurchased stock structure to changes and fee $XXX We Our to total active million. NAV value which shareholders. repurchase have $XXX program for our authorization $XXX per has NAV, creating our accreted million plans of for below share. we over believe demonstrate commitment of

December our strong a our the grow prudently Apollo by grow platform. increasing approximately quarter, by our exposure of corporate X% and implement our Moving floating lean to we by plan sourced origination loans the quarter With to rate first successfully origination direct continue to portfolio. portfolio

our noncore During our legacy and the also quarter to and we reduce lien loans exposure second assets.

$XX Second and million. lean asset total totaled noncore million sales legacy repayments repayments and $XX and

to strong our times at end increased leverage net quarter. our X.XX the activity, net investment ratio Given of the

stated level X.X between on and will times. our conference As calls. leverage X.X consistent that our with This we operate expectation private is

in portfolio. In reducing noncore the XX% The our of unrealized in million quarter portfolio of portfolio. assets makeup an addition, repayments the was noncore this decreased noncore combinations by $XX losses, to important the inflection point approximately of to

free earnings Apollo the our the combination the remaining restructuring noncore noncore in increase us our proceeds profile In due while and and the received impact collateralized smaller to allowed portfolio from and have a the repayments legacy of of the this portfolio investment. during has to of of have successful noncore risk better of reinvestment improving overall attributable our the restructuring period. addition, chemicals carbon investment to decreased The

continue in over due loss distribution quarter from renewable $X.XX a the to net to income net share the Noncore of $X.XX $.XX in oil our It of $X.XX The accretive by XX.XX income NAV investment was current assets and and the which asset was at was of drive shipping will December per for in cents total on nominal is net share financial portfolio assets fee the the results, of $X.XX, X.XX in reduction the return earnings was average loss, investment reflecting portfolio offset the that quarter Net per $X.XX leverage value $X.XX, net quarter. $X.XX and times resulted were net our X.X% legacy $X.XX. of the loss, and impact excess net for Moving structure, they portfolio legacy growth the fee $.XX for note growth a partially for share the to at in XX% incentive incentive a for down client per share repurchases. accounted to larger quarter. and important gas quarter. for accounted quarter and feature or of end

of distribution record a to a approved our board March to distribution Turning the share XXXX. per cent as has $X.XX XX, shareholders

With to over that the investment turn Tanner activity for I'll quarter. for call the

Tanner Powell

significant for highly Thank lenders given capital you, lending. Howard. the middle middle amount The of raise remains competitive market market U.S environment for

during origination As activity loans quarter, corporate focused platform. Apollo sourced floating the investment Howard mentioned, the lien direct our by on first rate

commitments and million $XXX funding investment and $XXX million were New respectively.

our points for X.X leverage assets. The XXX basis commitments commitments of commitments debt within the for new basis New commitment average times. incremental of average over net weighted XXX The times were rate range our points new X across $XX.X new range was were XXX floating commitments of lien to size of within an loans. for target LIBOR these average million. spreads weighted to X.X were all companies XX first These

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

marks million repayments Sales totaled excluding investment net in million total of for $XXX $XXX and $XX activity million of exits activity. totaled and funded $XXX resulting million revolver

assets. During we second our legacy lien to and the quarter and reduced noncore exposure loans

sales repayments glacier, total million one million including, and lien investments assets. repackaging, asset million gas of [indiscernible] Noncore $XX repayments intermediate. legacy asset asset a two PSI, including our $XX oil from total renewable from our $X $XX and Second of legacy million of $X million, and from

million, $X funding million of addition, million, and net funding, including Merck's. revolver received and a repayment In activity. from $X net $XXX we also revolvers totaled Net Merck's were

Now, status on status. of X.X% represented fair from quality. No of placed at from overall or down cost X% portfolio X.X% end and December were last the down minutes quarter. the investments last discussing investments credit let a quarter spend nonaccrual on X% removed me nonaccrual At value few from

times in The average average improved exposure. lean to X.XX our decreased leverage at weighted commitments. average of for X.X compared from corporate weighted exposure times. The lower the X.X remain weighted X.X to to on compared down coverage X.X new portfolio last times the from from and spread is new times quarter declined X.X times portfolio second assets to XXX the attachment on to increase of first spread credit decreased point commitments. points lien XXX when the lending basis to metrics, for XX in the Moving average our points to average due and basis And investments XXX times. interest decrease the net The

quality in of positive a said credit the this we trade this cycle. the for past, the we credit As as view off yield point at in

With financial will over Greg the quarter. discuss for turn that I the to performance now will who call the

Greg Hunt

million of income Thank prior or recurring statement the $XX.X recurring total The spread investments by lower from compared higher the for income in was net prepayment offset activity to on Despite and investment quarter. interest million investments the and quarter. the income. the declined you, partially new income income sold attributable investment activity, lower LIBOR dividend and positive fee during X.X% and quarter attributed and Tanner. due with to decline or cadence Beginning income decrease December interest $X.X the was to repaid

and interest down $X.X were last quarter, with April quarter. lower XXXX. up look from million quarter last million XXXX include was effect incentive into $X.X $X.X slightly the X.X% X, over $X.X dividend return back Expenses a beginning rolling $X.X on $X.X the January up down and for million total X, revised was and incentive a was from to a from expense. from fee million million, to primarily $XX.X or million income was income put million due quarter requirement lower million quarter, Recall, fee income Fee XX quarter was $X.X prepayment significant last quarter

offset X.XX decline approximately $X.X $X.XX share $.XX to September compared quarter. income balance end the quarter. September at billion. of at an quarterly a $XX X.XX redemption balance end average XX in partially Net the the from times September. LIBOR basis from by average Average to quarterly interest average The for utilization this X.X%. up slightly and share per the growth. per costs the compared quarter million prior quarter declined times decline $X.XX in declined weighted times from increased the the average in costs The leverage was billion average of debt the outstanding debt quarter the baby given December the during the during higher which from times to due X.XX% leverage was the the investment points X.XX expense benefited weighted credit portfolios to of X.XX increased bonds funding Interest for facility was by of of to Net given

for per net quarter loss legacy The million the $XX.X was $XX assets, Approximately free Hawk. share portfolio publicity, solar end noncore including of and compared net share. million at our of total or end our $XX.XX the carbon September. glacier, the in $X.XX or $XX.XX loss to XX% Spotted and attributable the the value was at asset per to investments Net of December in

the composition. towards Turning portfolio's

end with total of a Noncore consisted up XX% of of assets ago. XX% and XX% the at $X billion the XX quarter at value ended ago. representing of a portfolio year assets XX% Industries. of down year portfolio across of the September We assets XXX from Our September end the companies from XX% and of compared end decrease XX% December to had the to the and fair core at a

quarter point lien last portfolio from X.X times increased up First year the from The to improved quarter. XX% to times lending XX% corporate down and average last assets attachment ago. X.X a XX% weighted of from up

exposure combination the portfolio spread decreases XX% our and portfolio lean to was a to lending at XXX basis to That quarter XXX, to down reduced the average first the a reduction in of in due to yield quarter quarter, corporate quarter. the quarter, co-investment over LIBOR Investment XX decline corporate due primarily the secondly year to average and a investment. and the lean points XX% basis at the portfolio exposure made weighted decrease increased end pursuant for lending XX% order of was points our of last up from to X%, from XX which The increased ago.

$X.XX On billion our the at liability of had side the the of we outstanding quarter. sheet, balance debt of end

on continue evaluate sources capital We with alternative sources. particular funding to of a diversifying emphasis our

minus B from As agency's last may fixed plus you seen stable. triple have lowered to credit week BB rating

we actions, use rated market of that our quality in credit of switches increase leverage. the our we is stability, and identical of quality higher. with the CLO often will believe disappointed in more portfolio we're loan portfolio high have which believe interest senior loans our Middle While by improve profile built offset a best We which earnings stakeholders. result risk are

we stock quarter, million. regarding price of average for cost buybacks the of repurchased XXX,XXX a at during Lastly, $XX.XX shares $X.X total cents, an

stock, Given open remarks our November. the prepared been have questions. no the operator in This shares recent since concludes please rally the call early and to purchased

Operator

[Operator Instructions] Capital from first question take the Markets. Kenneth Lee We'll RBC of our line with

KennethLee

Hi, thanks for my taking question.

term? any sales portfolio, as legacy sales wondering within you're what some got sales looks and in now asset are you the of on further the within if portfolio one side the that right expectations near for Just the noncore

TannerPowell

remainder then sale So around repayments existing you on, assets. $XX the there know, one, repayments, some and and know, meaningful and you sales million of of its the was So, was right?

And because have to sort these getting of sort -- on liquidity return we're on on a and capital. expect we all to focused of repayments continue so of

example, quarter So, receive obviously, will of last of excess quarter I $X as but three, we the any million five this of glacier look exactly know and for sort capital we capital well. have quarters, the of four, assets we if each received binary, don't receive are those you and at during wholesale

work have we of, happen down portfolio, significant one So continue to to pay which anecdotally. sources which effectively, expect to liquidity or can would exposure restructuring capital in receive and access, that then sort continue to the is two of towards

KennethLee

Okay, one if that very may. And helpful. follow-up I just if

terms portfolio macro over with few outlook, lean as increasing consistent this continue on of portfolio talked next you want thoughts positioning, your terms percentage a trend quarter. the that? get Just the positioning? And do the the in the you In just about first to of expect quarters this being Thanks. overall to of that

TannerPowell

and where we we've Yes, the of of we've I will our believe at credit where with quality. legs the level stool, know, good the and predictable leverage key power our mean, that's that portfolio, current one earnings of if we're I we focused. you have is mean, we consistent got, of you makeup guided

by And staying so in way the we is capital deliver high up that structure. the

KennethLee

Great, very much. thank you

Operator

Our from Shane next JP with question Morgan. is Rick

RickShane

guys, Hey, questions. thanks for taking my

a steady, a there continued we write nonaccruals four the last fair been you sort we taking three do when you as the that are more So, there's What of at look Their a deterioration, conservative value down over those seen approach? quarters. just look at investments?

GregHunt

And commodity it's almost it's Hawk. by Well, Spotted almost all prices. all driven

than not So the commodity. all not of change that. fundamental performance cost a exclusively that [ph] It's company the other the fact,

RickShane

dividends, two you the is job in higher same advantage they're reconcile thanks decline. right of reverse have do the taking to that those do the How you operating Great, divergent ultimately and the there the leverage issue? the continues trends EPS, and NAV steadily covering One trends two NAV at time issue, the other the direction at is how think I Greg, point this NII good a you here. done guys moving

TannerPowell

we're So, to capital at the on the and focused one side, on coverage available sufficient be that revenue dividends. generating to work obviously we be to having have

the assets earnings renewable generating you equity So, noted, a then cash of return. noncore there we're know, as an has portfolio, which non which lot this or sort or you have are Hawk you portions portfolio Spotted a with of like not are a we know which

So X%, in that X% X.X%. portfolio is on average somewhere the producing or

the decline that given getting quarter time, is same that shifts assets be capital twofold on focus the that on all depending our reinvest NAV, at but off in the because doesn't that order those are and that sort is the return much, sort to maximizing focus dividends So it ensure on double in back paid the so, a of can return. of

put So way. another

billion at $XXX If last I off a comments, received years look we my portfolio. the you X in as mentioned million on over X.X

while $XXX $XXX million of proceeds. like So roughly there's write we've been down of million received

you of we same if NAV portfolio, in but reduction you'd on you that the took back all $XX and another you increase recovered XX% not all would of got and million, in at hope the tomorrow, expectations If $XX know predicting a earnings. have I'm cash percentage have our significant that to that

you we normal to sort the so, in of know, at work course, X% because And so that in put and and

reduction we'd lot and prices, can which rather by not NAV like a occurring, put NII. two driven drive been they two they we those capital in in of a work noncore rather not been and been, the they have so then countervailing losses lot we'd change, that by in change, the are has to feel return they trends, but but of one been a can able has that been has joined which where risk, that have then to commodity then have NAV

So you that goes level the know, of possible off goes down, obviously portfolio right as that down. noncore you know,

And on so that. we're focused

So dividend, prices everybody total we're Even be these upside -- at the to we'll we commodity pay cover the net mostly in to it's dividend more But at we if can realize to even covering a and if like assets. today, consistently our the volatility now share where able Even point the feel clarity. have economic beyond. continue meaning dollar shareholder.

RickShane

it. Got

continued that trade-off go ratio guys unable and more like and right strong you feel terms we are if side given do market, NAV we are leverage of into approaching Okay. market in about a where of where Last that you terms in of now guys capital. some there's lean of to leverage? pressure opportunistic sort be in leverage dislocation the and good to off causes you back XXXX, to how in targets saw look, you is to question, flip are will your that were a The deployment a see prove

GregHunt

we'll a foremost, changes repayments first capital, change our cherry-pick we business assets they're feel predictable for the perform portfolio order Apollo which our and which of more the and some stable If and structures sort to as given like good. effectively there to to our platform, the so combination quality have capital on feel much have able ability deploy we earnings in to that and have that take you cycle. like as but have opportunity. was Because have if market our sort as to the opportunities to the sheet for set off sell margins those of to to of be in be of some just of remain if going we perspective advantage there's the up from generating well it be like feel you on the is course, opportunities not these of the capital stream, to a is from ability sort We on benefit narrative X platform would we and X assets well course liquid to have But the to still normal assets, as will ability it. balance enough

RickShane

much. you Greg. very Thank Great,

Operator

with Point. Our Alexander next is question from Casey Compass

CaseyAlexander

afternoon. you downgrade to relation in of the the you side of What Fitch to diversify liability debt of you the to of covered sheet, by especially XX%, One, do sheet? in facility. the liability side side light available Good the you're the questions. XX% balance couple have vehicles A of think upwards balance the

GregHunt

that either we portfolio We to Casey, where comfortable attack grading can us we from. come have at market that market is our at the are debt still growth or feel crawl. to from investment-grade acceptable as going rates convert look we and the very

CaseyAlexander

I If $X.XX for you. NII share. Okay, up with calculate quarter, thank the a come I adjusted

building investors dividend where you have more were a that balance the loan and that LIBO a excess and forward, funds adjust me cover many to you frankly cover return in where Wouldn't level to beating need is now at very were senior Frankly, guys, right it everything dividend NAV dividend you sense? comfortably on total the a sheet, it the go Wouldn't going offer better seems of to dividend with over XX%. to not you if to the dividend. really Looking even expansion that first-lien the consistently as time? is a secured make

GregHunt

think I no.

is a adjusted You're low. bit probably number little

I think to low, but it $X.XX it's bit the little range. $X.XX a call in

lower for leverage we're at was the Our now. quarter than where average right

or So that our cents to drives $X.XX another so NII.

like to tend just over grows, fees, our our will creaking it recognition we're wouldn't it. As portfolio expand. of also I say

we So of past the the I that can deliver think we we for promised and shareholders the to that. our do the us is like over view feel -- return is expectation that X.X years

We make point level much kick at also fully almost goes worst because the now it has more more, goes floors it for down this LIBO us up, hit though, feel -- like money. possible employed right we our in,

this we've go, when So can NAV it other dealing everything there cover most being to equity was being driving you that is all the dividend. we've leverage the will and And ways, been since at some with along started point I our level some think level, we be gains say other value we dividend. question things. where do I in capital how the ways Sending we when a despite caught to LIBO with necessary gotten we're right, don't levels with of AINV grow point And has secure tag of this think if even to with we with the covering dividend that investments. the it. the it. where we those cover times would We're keep we think some with are the associated change some to there it and max

CaseyAlexander

for you appreciate it. thank Okay, I questions. taking my

Operator

Our Chris is from next JMP York with question Securities.

ChrisYork

taking Good thanks questions. and for my guys, afternoon

the today? if of require spot rate are that to or in service your Greg, even Maybe So had I year-to-date in stays your a portfolio what portfolio? precarious specifically maybe spot even but on oil has any spotted then equity portfolio risk commodity And Hawk your cover the this know effect are crude spot for now companies an Howard companies secondly, decline hedging injection? at

GregHunt

longer-term the drives the curve The The valuation. spot price drive doesn't valuation.

the than as term to don't That the a in of movement the day. correlate long respects today it lower prices in was but is directly snapshot all respects most of valuation So of the in not ago. said, month different, projection the that lower prices

And short so down and to be some at sat that is would cash meaningful it would term, oil that time, medium their book be In two case to at they Hawk that don't. Spotted cash perspective, the the down sort -- cash term. we expect are in given valuation inflation We down but of oil where from flow don't the paying hedges term, least an not that part has currently it been extended they've period some. no affect generating debt, XX of in though. before stable on today of it's strong have the Is issues, needs. Obviously, a pay some for short and the deals now There's of could the question in sat ability the answer? most place. in a but debt the been there If create XX

ChrisYork

down it's little I here. Yes. looked the and yes, forward bit, at spot curve, moved a the with too,

so just to think if… trying of And I'm

GregHunt

number. don't to give the I want exact

based XXXX are the up stuff another expected actually differently. Those at is little which compensates The in like, curves one. valuation ultimately for our oil week, relevant those of these thing we companies to on long question better XXXX, that curve ground necessarily last on at of All is you one curves get impacts the sitting what it's -- a be quarterly some Friday, if that valuation but for coming said, will brunt when value have are [ph] prices is the out frustrating relevant of we which company, The period the is and asked just We because to say WTI number bit time. is of our when sitting same the term asked. they on don't XX, for last are the to a speak of and That XX. look

And see move in so geography you to tend that the direction.

of expect down if drastically value. month, XX% as change, like moves be past you something to the more like as didn't up. oil the So It of Like it go XX over up, given would the terms not it from doesn't quarter XX that wouldn't drastically well. in that when sort it's this of in but drastic It's decline. goes it just

ChrisYork

That's helpful.

points short understand there $XX, a XX that Just Hawk. you Maybe would cause? pain next just term, XX, trying for potentially to points at the months, was the Spotted so what $XX at talked if level the move price pain for I'll about it on.

this little was Secondly, is And capital facility. below your bank Casey revolving XX% to asked It the did IG. mention Obviously you on structure. your then tied downgrade a capital debt credit of your bit.

what sheet capital cost You do have form that is Kroll balance diversify, leverage? but And about investment, capital, your talked do investors the which securitization, potential stream? sustainable then just Greg, think the sustainability one debt would how of but be of you should full at think on you about the a good of debt

GregHunt

we said, closer to of That of it'll It's meaningful. you're in a offering we marketplace. that size think did given X.X. Maybe the I X.X. or that as favorable convert an still go would think but we don't slightly may, be up might do I cost at bond if Well, the very we're X.X, a capital offering

ChrisYork

Got covenants. And the then have on it. there would But to pricing bank I facility your the downgrade credit there? review is adjustments any in

GregHunt

the that on. No, our really rating sub-debt, it's for -- we are really because just it's

ChrisYork

Howard, Then last one here.

does involvement up prepared it little about Apollo business the The is reason a for why development. true. remarks I bit that Absolutely your have talked relief exemptive with coalition that's in bring AINV. benefiting You

me to of this application BDCs your in So on update for AFFP year. potential the prompt just exemptive revisit the likelihood for relief

GregHunt

on Right, the approach actually fund-to-fund change. more We SEC point. at go door has a are this so that approach the and application by at looked the rules that fund-to-fund working and that been legislative That with being withdrawn. toward to

with the that they application, looking function very fund-to-fund the think topic. And we're direction The a which really we know-- in at approach. was of SEC this good the of thing I is that the were as our So better that withdrawal a going rules. became familiar with

ChrisYork

identification Greg, application removal does change to of be of a [indiscernible]? probability year potential of the withdraw your this AFFP that the of

GregHunt

to it has don't. as of I it get done getting able did for. rules we're actually No, If than asking a a the better that fund-to-fund exemption were we chance in standalone

ChrisYork

Thanks, it Got That's it. guys. for me.

Operator

Joseph is question Jefferies. with Kyle next Your from

KyleJoseph

good asked questions and my have Hey, of guys. afternoon been Most answered.

few ones. a Just modeling

In a forward? there run look for were one-timers income quarter any what's terms in the going of to and rate dividend good

GregHunt

think fine It's our million of to I Now $X.X out coming you're $X investment. million. shipping at really

KyleJoseph

Then What that? helps. drove that it, quarter. specifically it Got the like looks increased in peak income

GregHunt

it was which approved quarter-end. on to partially down Bumblebee restructured position What on weekend. restructuring and subsequent had We this paid drove their been our

KyleJoseph

going to back, on was where even terms portfolio appreciate year say we X just simplify versus metrics months you a the versus in revenue gross EBITDA, just and us but ago can are of color and Tanner's ago? stepping it I tell broadly

TannerPowell

places, Yes, the commodity sure. of pressures. gone positive price growth recent continuation standpoint, we've are of wherein obviously from grappling growth on number companies still underperforming costs as seen cost earnings with a industry, notwithstanding is pronounced. our freight things more wage are the trends an EBITDA growth is revenue It's very or much of that revenue basis organic magnitude been downdraft in a in Depending up, prices, most certain commodity the pressures. a the have on But but

QX. you've that continued has -- last seen couple through of that frankly, So for the something quarters seen and we've in a been

KyleJoseph

answering Thanks Got it. me. question. much very for That's my for it

Operator

from is Lynch question KBW. Ryan with Your next

RyanLynch

taking for Thanks questions. my

to removed market range. very a activity. I to seeing very which don't good I'm X you deal range would environment in it your competitiveness environments how are guys talk today, good time has wondering, the you're market. years wanted last leverage passed to target cycle. obviously, XX be seem an to wondering seems would you are want we increasing current risk X rewards, target range? initially for to most X.Xx. There's leverage, think that increase It would that one X.Xx. comfortable leverage you in ranged credit guys When a just it your and where robust leverage of That that you leverage a the lot had getting to to guys from range just increased to X.XX is I over participants this how of First over be about I'm characterize which flow X.X

target getting just in environment, about you what is comfortable how you this leverage can process and increasing of the this are talk thought range? So

GregHunt

is first take of amount very flow. deal we the That's of of the what has is sort to because are I'd thing deal the we've off. AINV today for so that good seeing say on few years Well, flow last focused

leverage we of versus ranges obviously good to we the from is, of amount believe platform is similar our time have is that dynamics over get you're that's same The What part is amount way. really what but we year. historical a talked So end versus across have the platform which things? previous and a about, is gotten to you of answer X.X sort assets. is you the wide said right other such producing first investors because to these employing competitors origination the that of off BDCs deal a X.XX granular engine if sort the your capital flow dry for the when when and stuff one versus the portfolio finance have a stretcher to, commercial said because market sorry proprietary the that's for is don't levels broad-based, a it a opportunities. we the to get assets. corroborated leverage narrowed platform there's lot in of we our investors of to builds build build months and these of powder to you want by assets a a continue lot pick of asking is the for to a the is available portfolio questions funnel we've across even ago, the even At you about of significant or that small quite bit. to that raised our constrained that That's flow high lot And what about of specific want of cycles low of it's portfolio, that part more this -- -- you we institutional XX AINV, deal the the of very We outcomes -- overall had

answer the is, being platform. circumspect whole are overall So our across we

of of have grow. of have teams challenges account relationships the assets reject of the to and into depth ability AINV size origination take still markets. competitors, size for our our enough of side to huge like the deals. [indiscernible] size and differentiate few the of because for because ourselves the our and Our we our debt our origination the a a And takes We of of example, amount the platforms

the stable. year, the had sheets. it portfolio just say those not it runoff spreads more And I'll is the much Ryan, assets last loan business. And mid-cap at larger, and as origination been as lot generates that's there's already It's has over grown it is a like though lot new past also of balance even so point a because of a leverage

have view a coming view big we funnel deals the through. you very we like So of market, the market just

RyanLynch

shake I'm more you realized for portfolio sure this, of incentive assumption but next neutral your expect of percentage that out is trying hold earn incentive half looking to just Okay, what the under kind constant? to losses, and to not would appreciation get unrealized portfolio of mentioned where of or that's me one what helpful and color, depreciation just holding quarter that gauge you zero if I'm if that gains kind or a guys you and

HowardWidra

full there we'd If the fee. incentive quarter, next no losses were pay

RyanLynch

you Thank my guys. questions. Okay, only those are

Operator

Raymond from is Next with question Robert Dodd James.

RobertDodd

Probably Greg. guys. a couple for Hi,

other more go trading look I blended things look a the it the and look obviously par if trading, be now. to But mean, up. notes facility shift On the addressed If notes at, you've or me before couple mix times. that they the of downgrade above at you to I XXXX I par when from out still costs to the downgrade would above there the

is you I side? buying So any cost do types impact like on mix up borrowing to affect think you like note of Fitch to but you your meaningful borrowing than, you if four, shifts, on you're the costs going have of if mentioned do go of think know, for, four, the for that to like, downgrades kind like the going rather downgrade actually

GregHunt

I a know, it know, actually that are $XXX math, did only you quickly No, of three, goes our cost I the outstanding. don't you know, you so. and, four, the you'll just million I think funds of do No, if up inside be think you offering, bonds to on the

RobertDodd

Got in queue trouble picking $X.X the on color can in the cash the but that right? also There notes guys. the queue the give things or reconciling it. mean, from one I Bumblebee the was to was recognized, P&L then delta if the was almost or million And I'm having us reconciling I've That's on some just, that that it's big or in come I $XX more flow in you in elsewhere any gap. or a pretty could [ph] seen on million you biggest capitalized. ever because related some

GregHunt

We think capitalized carbon was and not carbon our and free prior. it position pic the recapitalize restructuring free, was to the that been

RobertDodd

it Okay, was you but nonaccrual run previous didn't capitalize the that the so P&L. nonaccrual you for you that if

GregHunt

it restructuring the quarters and P&L the that debt. was an capitalized the of sitting in interest receivable in through and run It prior as was

RobertDodd

had. Thanks. Okay, I That's it. I all got appreciate it.

Operator

And O'Shea line comes the from Fin Fargo question with Wells Securities. of your final

FinO'Shea

for taking my Hi, question. thanks

us you're carbon just Just restructuring, a the give affiliate extent on to seeing follow was the you any investment. can an on free, this context able

beyond to more level this so sort trip did position, into de company a debt? Or today is at your the any there So then that, how reduced of is part second performance converting equity? risked more measure? And

HowardWidra

of I'm you're position. clarify saying sure what me not all, it's an let you? I'm if just first not affiliate

FinO'Shea

like table your affiliate. On ownership your percentage

HowardWidra

think don't that's. Well, I

of was build that to well project, owner both as this you produce make equity off carbon a as to to So more things did the IP what that what the It's technology. the off free running us, of there's two basically, a sort know, restructuring profit stable. value facility basically,

basically, know, equity of restructure, to that investor. sort us align Our changed our you with deal directly

both we had in will of money So, good debt you had raise other that believe in IP, and monetizable on valuation. has at we and a company operating the places ownership we is our

so will. have done And of of diversified so our terms in one what you stability, if collateral, sort we we the

lower. before, operating to this IP, that the both separate position that the allocating is carry the has now plant, which portion this two, basically of we previous which had collateral and had that, because the it equity, companies of is also the value a is that's one because and forced separately, So much of to has value, and debt now

easy is its of entity flow cash the it debt. profile that So, it's for service to

commodity still driven a it by price. know, You

debt. So it on some it have can its less ability, now still has variability but

So it debt. has lower of a burden much

You know, also [ph]. pick no

to anymore. want grow You know,

which So it cover value. that like have than million it will a we a $XX before. have cover, less will pool pace is then can something of debt have a far And separate that

Obviously, And as direct view before. from it so wrote as meaningfully where we well. down it some was we

debt, as there's less service more there's So less and collateral. debt to

FinO'Shea

Okay, appreciate that color.

end, and LXXX since Apollo, questions. mid-cap couple across was your Apollo and you on more other you accounts? with LXXX BDC of overall since a the the the last LXXX this tilt, growing there the know, the about then acquired or couple keeled obviously the BC or of you're quarters, directional staff its another on been there allocation you and as you reflective is even in But is generally follow was funnel Would that SMEs, talk the now mid-cap, is funnel one of tilt say you on seeing on-boarding know with That's there allocation? stuff. allocation Can it to on be seeing. Just co-invest seen

GregHunt

it be return on leverage we could and have could look be that Well, six it seven each they you separate criteria, industry some in different deals based some or know anything. invest based have investors based to

in what market to large, lower the you is our X.X of the X to And Mostly debt times leverage that's loan. for so done effectively the that's is, times origination people the LXXX range. vast opposed bye X in majority not as in being know the doing where that much cost. There not AINV is as X.X, want, is because

leveraged to just $XX about was So, mid-cap two year, you of new give did commitments of billion that some in numbers lending. last thirds

big make to origination it do. get deals enough when and that basically AINV sciences, makes means part those real the an is And might the that life that we for sense So in estate. can is sense, it make for of enough AINV they're ABL third them size sense know other it

loan two loans. that XX thirds or across The our book other leverage something is billion so $X like

are to do. XX probably them XX profile of may below guessing yield below to choose the that that there's of that AINV the I'm want profile are yield that know, to XX and You them

FinO'Shea

you the all That's thank Okay, for color. me. for

Operator

call over the further closing are at no management remarks. turn time. to There I'll any back this questions for

Howard Widra

out your Thanks. continued us have you feel if today good support. reach to time your for of Please Have questions. night. any a any Thank you and to free everybody,

Operator

today's concludes this gentlemen, you participating. for conference and Thank call. Ladies

disconnect. now may You

Elizabeth Besen	IR
Howard Widra	CEO
Tanner Powell	President & CIO
Greg Hunt	CFO
Kenneth Lee	RBC Capital Markets
Rick Shane	JP Morgan
Casey Alexander	Compass Point
Chris York	JMP Securities
Kyle Joseph	Jefferies
Ryan Lynch	KBW
Robert Dodd	Raymond James
Fin O'Shea	Wells Fargo Securities

MidCap Financial Investment (MFIC) 5 Feb 202020 Q3 Earnings call transcript