Apollo BDC trims energy positions, ups first lien exposure

The firm initiated the plan last year to lower the risk profile of its portfolio.

Apollo Global Management’s business development company continues to offload its energy exposure, executives said on an earnings call Friday.

Apollo Investment Corporation has made a significant reduction of its oil, gas and renewable energy assets over the last year, Howard Widra, the BDC’s president, said on the call. Oil and gas exposure declined to 6.6 percent of the portfolio at the of the end of last quarter – the first quarter of the firm’s 2018 fiscal year – marking a drop from 11.6 percent as of 30 June, 2016. The firm’s assets in renewable energy declined to 7.6 percent of the portfolio as of 30 June, down from 8.9 percent at the end of the second quarter of 2016.

This strategy comes as the BDC showed a year-on-year drop in its net asset value per share last quarter, ending at $6.73 as of 30 June. That figure is relatively unchanged from the $6.74 of NAV per share as of 31 March, but down from the $6.90 NAV per share the firm reported as of 30 June, 2016.

The reduction was a continuation of the plan Apollo initiated last year to decrease the risk profile of its portfolio by offloading energy investments and other ‘non-core assets’ like structured credit products.

The mid-market lender has subsequently invested more in first lien, floating-rate debt over the quarter as part of its efforts to lessen the riskiness of its portfolio, executives also noted.

First lien debt comprised 47 percent of the firm’s total portfolio at fair value at the end of last quarter, up from 40 percent a year ago, while the BDC also increased the share of floating-rate debt from 77 percent to 86 percent over the same period.

Apollo invested $342 million across 11 new and 11 existing portfolio companies over the quarter. The firm’s portfolio had $2.49 billion in assets under management as of 30 June, up from $2.41 billion in AUM on 31 March but a decline from $2.64 billion 31 December.

The BDC’s investment income was $33.3 million, or $0.15 per share, for the quarter ended 30 June, compared to $37.3 million, or $0.17 per share for the quarter ended 31 March, earnings results showed.