AINV posts NII losses as it continues pivot toward core assets

Apollo’s BDC saw a NII loss of 1.9% in the fourth quarter, but was able to decrease its non-core assets to 16.7% of the portfolio.

Apollo Investment Corporation (AINV) ended the quarter with a decrease in net investment income as the business development company continued to shift its portfolio strategy.

Over the quarter, the BDC’s net investment income fell 1.9 percent to just over $31 million, compared with more than $32 million at the end of the third quarter. There was a loss of $0.02 per share.

Its net asset value per share stood at $19.03, down from $19.40 per share at the end of the third quarter, and $19.81 per share from the end of 2017.

AINV’s director and chief executive officer, Howard Widra, said during the fourth-quarter earnings call that the decline in NAV could be “primarily attributed” to the BDC’s stake in various non-core assets, which it is actively trying to exit.

The BDC partially exited one of its non-core structured credit investments during the fourth quarter and, combined with returns from two of its energy investments, it was able to decrease stake in non-core assets from 18.3 percent to 16.7 percent. Core assets now make up 80 percent of the portfolio.

AINV invested more than $221 million over the quarter across 28 different companies. These new investments were comprised of 94 percent first-lien loans and all were floating rate.

At the end of 2018, the portfolio comprised 64 percent first-lien loans, 24 percent second-lien loans, 9 percent equity and 3 percent structured products, all of which are entirely floating rate. The portfolio has sustained a consistent 10.7 weighted average return over the last four quarters.

In January, the BDC announced that Gary Rothschild, the president and chief executive of Merx, which is a wholly-owned portfolio company of AINV, also became an employee of Apollo Global Management.

“In order to maximise our value in Merx, we believe it was necessary to improve the connectivity between Merx and Apollo, thereby enhancing Merx’s ability to source transactions for the entire Apollo platform and availing itself of the opportunity to access Apollo’s fundraising capabilities,” Widra said on the fourth-quarter earnings call.

AINV is a New York-based BDC that was formed in 2004. The vehicle has more than $2.3 billion in assets under management. The stock was valued at $15.01 per share as of 2:05pm on Thursday.