News & Analysis

AINV to shift toward ‘traditional corporate loans’

The move by Apollo’s BDC comes amid continued exits from energy investments that have weighed it down.

By
Andrew Hedlund
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Apollo Investment Corporation (AINV) has said it will begin shifting its attention to more senior-secured investments and partner with its MidCap Financial affiliate.

Executives from the New York-based business development company said during its second-quarter earnings call that the company will be shifting its investments to “traditional corporate loans”, which would be “sourced directly from the Apollo platform”. Secured debt comprises 65 percent of AINV's portfolio, broken down to 40 percent in first-lien loans and 25 percent in second-lien loans. The company's net asset value declined by 5.2 percent in the second quarter.

The company's investments in oil and gas made up 11.6 percent of its portfolio at the end of the second quarter. Among the company's oil and gas write-downs was a $6.6 million one from Venoco Oil and Gas, according to a Wells Fargo report. AINV currently has Venoco's loan on non-accrual status.

However, Extraction Oil and Gas paid off its AINV loan with a high-yield bond issuance in July, meaning that AINV's portfolio now consists of less than 10 percent oil and gas. In the second quarter, AINV exited its investments in Deep Gulf Energy, Osage Exploration and Development, and Renaissance Umiat, the company said.

According to the earnings call transcript, executives also emphasised AINV would lean heavily on MidCap Financial, which AINV acquired in 2013. The BDC received co-investment relief from the SEC earlier this year and can now partner directly with MidCap on transactions.

“As we continue to exit investments, we expect to put more capital work and assets where MidCap has an excellent track record,” AINV president Howard Widra (pictured) said. The BDC would also add more specialties from MidCap to its portfolio, he said, including life science lending and asset-based lending.

“Access to these additional products should not only help diversify the portfolio, but it should also provide returns that are less correlated with the liquid credit market”.