Apollo Investment Corporation Investor Presentation

Transcription

1 Apollo Investment Corporation Investor Presentation September 2017 Information is as of June 30, 2017 except as otherwise noted. It should not be assumed that investments made in the future will be profitable or will equal the performance of investments in this document.

2 Disclaimers, Definitions, and Important Notes Forward-Looking Statements We make forward-looking statements in this presentation and other filings we make with the Securities and Exchange Commission ( SEC ) within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are subject to substantial risks and uncertainties, many of which are difficult to predict and are generally beyond our control. These forward-looking statements include information about possible or assumed future results of our business, financial condition, liquidity, results of operations, plans and objectives, including information about our ability to generate attractive returns while attempting to mitigate risk. When used in this release, the words believe, expect, anticipate, estimate, plan, continue, intend, should, may or similar expressions, are intended to identify forward-looking statements. Statements regarding the following subjects, among others, may be forward-looking: the return on equity; the yield on investments; the ability to borrow to finance assets; and other risks associated with changes in business conditions and the general economy. The forward-looking statements are based on our beliefs, assumptions and expectations of our future performance, taking into account all information currently available to us. Forward-looking statements are not predictions of future events. These beliefs, assumptions and expectations can change as a result of many possible events or factors, not all of which are known to us. Some of these factors are described in the company's filings with the SEC. If a change occurs, our business, financial condition, liquidity and results of operations may vary materially from those expressed in our forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation may contain statistics and other data that in some cases has been obtained from or compiled from information made available by thirdparty service providers. Past Performance Past performance is not indicative nor a guarantee of future returns, the realization of which is dependent on many factors, many of which are beyond the control of Apollo Global Management, LLC ( AGM ); Apollo Investment Management, L.P.; and Apollo Investment Corporation (collectively Apollo ). There can be no assurances that future dividends will match or exceed historic ones, or that they will be made at all. Net returns give effect to all fees and expenses. Unless otherwise noted, information included herein is presented as of the date indicated on the cover page and may change at any time without notice. Apollo Investment Corporation (the Corporation or AINV or the Fund ) is subject to certain significant risks relating to our business and investment objective. For more detailed information on risks relating to the Corporation, see the latest Form 10-K and subsequent quarterly reports filed on Form 10-Q. Financial Data Financial data used in this presentation for the periods shown is from the Corporation s Form 10-K and Form 10-Q filings with the SEC during such periods. Unless otherwise indicated, the numbers shown herein are rounded and unaudited. Quarterly financial information about the Company refers to fiscal quarters. The Company s fiscal year 2017 ended March 31, AUM Definition Assets Under Management ( AUM ) refers to the investments AGM manages or with respect to which it has control, including capital it has the right to call from its investors pursuant to their capital commitments to various funds. AGM s AUM equals the sum of: (i) the fair value of its private equity investments plus the capital that it is entitled to call from its investors pursuant to the terms of their capital commitments plus non-recallable capital to the extent a fund is within the commitment period in which management fees are calculated based on total commitments to the fund; (ii) the net asset value of AGM s capital markets funds, other than certain senior credit funds, which are structured as collateralized loan obligations or certain collateralized loan obligation and collateralized debt obligation credit funds that have a fee generating basis other than mark-to-market asset values, plus used or available leverage and/or capital commitments; (iii) the gross asset values or net asset values of AGM s real estate entities and the structured portfolio vehicle investments included within the funds AGM manages, which includes the leverage used by such structured portfolio vehicles; (iv) the incremental value associated with the reinsurance investments of the portfolio company assets that AGM manages; and (v) the fair value of any other investments that AGM manages plus unused credit facilities, including capital commitments for investments that may require pre-qualification before investment plus any other capital commitments available for investment that are not otherwise included in the clauses above. AGM s AUM measure includes AUM for which it charges either no or nominal fees. AGM s definition of AUM is not based on any definition of AUM contained in its operating agreement or in any of its Apollo fund management agreements. AGM considers multiple factors for determining what should be included in its definition of AUM. Such factors include but are not limited to (1) its ability to influence the investment decisions for existing and available assets; (2) its ability to generate income from the underlying assets in its funds; and (3) the AUM measures that it uses internally or believes are used by other investment managers. Given the differences in the investment strategies and structures among other alternative investment managers, AGM s calculation of AUM may differ from the calculations employed by other investment managers and, as a result, this measure may not be directly comparable to similar measures presented by other investment managers. 1

3 Agenda Overview Market Opportunity Investment Strategy Portfolio Review Conclusion Appendices 2

4 Overview 3

5 Introduction to Apollo Investment Corporation ( AINV ) Middle Market Lender Publicly traded (NASDAQ: AINV) business development company ( BDC ) treated as a regulated investment company ( RIC ) for tax purposes Primarily provides debt solutions to U.S. middle market companies with a focus on direct origination Since IPO in April 2004 and through June 30, 2017, invested $17.3 billion in 409 portfolio companies $2.42 billion investment portfolio across 84 companies (average portfolio company investment $28.8 million) and 23 different industries, spanning a broad range of asset types (1) (2) Externally Managed by Apollo Global Management Externally managed by an affiliate (3) of Apollo Global Management, LLC, a leading alternative asset manager with approximately $232 billion of AUM (2) (4) with expertise in private equity, credit and real estate Apollo Global Management, LLC was founded in 1990 Competitive Advantages Apollo Affiliation Apollo affiliation provides significant benefits Large and diverse direct origination team with joint front engine across AINV & MidCap Financial ( MidCap ) (5) Flexible Mandate Generally able to invest in all levels of the capital structure flexible mandate Broad product offering Experienced management team Exemptive Relief to Co-Invest (6) Expected to improve AINV s competitive positioning Expected to increase deal flow (1) On a fair value basis. (2) As of June 30, (3) Apollo Investment Management, L.P. (4) See definition of AUM at beginning of presentation. (5) MidCap Financial refers to MidCap FinCo Limited, a private limited company domiciled in Ireland, and its subsidiaries, including MidCap Financial Services, LLC. MidCap Financial is managed by Apollo Capital Management, L.P., a subsidiary of Apollo Global Management, LLC, pursuant to an investment management agreement between Apollo Capital Management, L.P. and MidCap FinCo Designated Activity Company. (6) On March 29, 2016, the Company received an exemptive order from the SEC permitting greater flexibility to participate in co-investment transactions with certain of its affiliates where terms other than price and quantity are negotiated, subject to the conditions included therein. 4

6 AINV Key Differentiators Strong External Manager Large and Diverse Direct Origination Team Broad Product Offering Significant Scale Commitment To Repurchase Stock Co-investment Exemptive Relief Active Investor 5

7 Strong External Manager Firm Profile (1) Business Segments Founded: 1990 AUM: $232bn Credit $151bn AUM Private Equity $68bn AUM Real Assets $13bn AUM Employees: 988 Inv. Professionals: 368 Global Offices: 16 Drawdown Liquid / Performing Permanent Capital Vehicles: -Athene -MidCap -BDCs -Closed-End Funds Advisory Opportunistic buyouts Distressed buyouts and debt investments Corporate carve-outs Commercial real estate Global private equity and debt investments Performing fixed income (CMBS, CRE Loans) Investment Approach Global Footprint Value-oriented Contrarian Integrated investment platform Toronto Chicago Chicago Los Angeles Houston Toronto New York Bethesda London Madrid Frankfurt Luxembourg Delhi Shanghai Opportunistic across market cycles and capital structures Bethesda Mumbai Hong Kong Singapore Focus on nine core industries (1) As of June 30, Please refer to the definition of Assets Under Management at the beginning of this presentation. Note: AUM components may not sum due to rounding. 6

8 Apollo Direct Origination Capabilities Premier U.S. Private Debt Platform AGM is a Leading Alternative Credit Manager with Permanent Capital Vehicles Focused on Direct Origination + AINV is a business development company or BDC focused on middle market debt $2.4 Billion Portfolio (1) MidCap is a full service finance company focused on middle market senior debt ~ $7.1 Billion Portfolio (1) Best-in-Class Middle Market Loan Originator (1) As of June 30,

9 Key Investment Professionals Providing Services to AINV Jim Zelter Howard Widra Managing Partner and Chief Investment Officer, Apollo Credit Chief Executive Officer of Apollo Investment Corporation Global Head of Direct Origination, Apollo President of Apollo Investment Corporation Total Years of Work Experience Years at Apollo Tanner Powell Chief Investment Officer, Apollo Investment Management, L.P Pat Ryan Chief Credit Officer, Apollo Credit Chief Credit Officer, Apollo Investment Management, L.P Average Total Years of Work Experience Average Total Years at Apollo 3 Managing Directors Principals Junior Staff Direct Origination Investment Committee Underwriting Team Origination / Sourcing Team 35+ people focused on direct origination / sourcing 8

10 Co-Investment Opportunities AINV received exemptive relief from the SEC permitting it to enter into previously prohibited negotiated joint transactions with other funds / entities managed by AGM, including MidCap (1) We believe exemptive relief to co-invest should improve AINV s competitive positioning Allows AINV to compete more on the basis of size / scale and certainty of execution, rather than simply on price Enhances ability to originate larger transactions with the ability to hold and / or syndicate loans Expected to increase deal flow number and variety of deals Ability to partner with MidCap which provides AINV with access to MidCap s expertise in niche markets with high barriers to entry Already seeing a strong pipeline of co-investment opportunities with MidCap AINV does not lend to portfolio companies owned by AGM s private equity funds Since receiving the order, AINV has invested $294 million across 15 companies, pursuant to the coinvestment exemptive order (2) We believe that the scale of AINV, MidCap and other Apollo managed capital, on a combined basis, makes us one of the largest market participants uniquely positioned to make large commitments (1) On March 29, 2016, the Company received an exemptive order from the SEC permitting greater flexibility to participate in co-investment transactions with certain of its affiliates where terms other than price and quantity are negotiated, subject to the conditions included therein. (2) Through June 30,

11 Market Opportunity 10

12 Compelling Market Opportunity If the middle market were a stand-alone country, it would be the 3rd largest economy in the world (1) Middle Market Businesses Require Capital to Support Growth (1) (2) There are nearly 200,000 U.S. middle market businesses that represent onethird of private sector GDP, employing ~47.9 million people. 22% 5% Capital Expenditure Information Technology 42% Acquisitions 10% Human Resources United States China U.S. Middle Market Japan Germany 21% Other Significant need for refinancing of existing loans made to middle market companies; Bulk of deals come due in 2020, 2021 and 2022 (3) $ in billions $7 Middle Market Institutional Loan Maturities $35 $28 $29 $22 $18 $14 $13 Significant un-invested private equity capital should translate into strong loan demand (4) $ in billions $553 $ Dry Powder (Middle-market focused PE Firms) Implied potential loan demand (assuming 40% capitalization rate) (1) Source: National Center for the Middle Market 2Q 2017 Middle Market Indicator. (2) Chart represents capital investment allocation of U.S. middle market companies willing to invest. 67% expressed a desire to invest. (3) Middle market institutional estimated maturities represents 3Q17-4Q17. Source: Thomson Reuters LPC. (4) Source: PitchBook US PE Middle Market Report Q. 11

13 Bank Regulation and Related Impact Banks Cautious Approach Total Number of U.S. Banks Continues to Decline (1) Post the Global Financial Crisis, there has been a significant impact on traditional financing sources and the global capital markets Banks have markedly decreased their underwriting exposure Regulatory scrutiny has continued to intensify and is particularly noticeable with the Office of the Comptroller of the Currency ( OCC ) leveraged lending guidance. Originally introduced in 2013, but has recently been more broadly enforced to reduce banks exposure to certain types of loans. 12,000 10,000 8,000 6,000 4,000 2,000 > 40% Decline since 2000 Impacting significant portion of high yield and loan markets Leveraged Lending Guidance Banks Reduced Participation in Loan Market (2) Main requirements for financial institutions underwriting leveraged transactions include: Leverage: cannot exceed 4x EBITDA for senior debt or 6x for total debt (including all committed capital and assuming revolvers are drawn) Repayment: senior debt must fully amortize or total debt must be reduced by half using free cash flow within 5-7 years Covenants: adequate covenant protections, including financial maintenance covenants Collateral: protection against dilution, sale or exchange of collateral or cash flow producing assets 100% 80% 60% 40% 20% 0% Banks & Securities Firms Non-banks (3) 2Q17 93% 7% Banks are participating in fewer junior capital transactions or syndicating increasing portions of their exposure Source: (1) FDIC as of March 31, 2017 FDIC-Insured commercial banks and savings institutions. (2) S&P Global Market Intelligence. LCD s Quarterly Leveraged Lending Review: 2Q17. (3) Non-banks includes institutional investors and finance companies. 12

14 Middle Market Lending Offers Better Risk-Adjusted Returns Control of origination for middle market loans is designed to result in better economics and risk-adjusted returns Benefits Broadly Syndicated Loans Middle Market Loans 1 2 Control Over Credit Documentation Due Diligence Access Partial Full 3 Credit Performance Enhanced Relationship With Borrower Limited Comprehensive Hold Size Flexibility / Control Origination Economics Premium Asset Spreads Syndication Control Middle market loans historically have had lower default rates and higher recovery rates than broadly syndicated loans 13

15 Investment Strategy 14

16 Investment Strategy Our portfolio repositioning strategy is based on the following key principles: Continue to increase exposure to core strategies which are: Senior secured traditional corporate loans sourced by Apollo s direct origination platform with a focus on first lien and floating rate loans First lien loans in life sciences, asset-based lending and lender finance, areas with significant barriers to entry and areas in which MidCap has expertise Continue to transition away from certain existing specialty verticals (1) or non-core strategies, which are higher on the risk spectrum and have more volatile returns Emphasize portfolio diversification and avoid outsized single name or industry concentrations With the continued successful execution of this repositioning plan, we believe that AINV should generate consistent and sustainable ROEs (1) Oil & gas, renewables, shipping and structured credit. 15

17 Significant Progress Repositioning Portfolio Deployed Significant Capital in Core Strategies (1) and Meaningfully Reduced Exposure to Non-Core (2) Strategies and Legacy Assets As of June 30, 2016 (3) Non-Core Strategies & Legacy 41% Core Strategies 59% Reduced exposure to non-core strategies (2) and legacy assets by $434 million (4) Invested approximately $746 million in core strategies (1) (4) As of June 30, 2017 (3) Non-Core Strategies & Legacy 26% Core Strategies 74% Improved Risk Profile / Portfolio Composition Increased exposure to first lien and floating rate debt, reduced average company exposure and benefitted from As of June 30, 2017 co-investment (3) exemptive relief (5) As of June 30, 2016 (3) As of June 30, 2017 (3) First Lien Debt, as % of Total Portfolio 40% 47% Floating Rate Debt, as % of Total Portfolio (5) 77% 86% Average Company Exposure $ 32.3 million $28.8 million Co-Investments, as % of Total Portfolio (6) 0% 11% (1) Core strategies include corporate lending, aviation, life sciences, asset based and lender finance.(2) Non-core strategies include oil & gas, structured credit, renewables, shipping and commodities. (3) At fair value. (4) From July 1, 2016 through June 30, (5) The Company has modified the reporting of its interest rate type information to be based on its corporate debt portfolio, exclusive of investments on non-accrual status. (6) On March 29, 2016, the Company received an exemptive order from the SEC permitting greater flexibility to participate in co-investment transactions with certain of its affiliates where terms other than price and quantity are negotiated, subject to the conditions included therein. 16

18 Target Portfolio We intend to continue to increase our exposure to senior secured loan sourced by Apollo s direct origination team, while adding exposure in first lien loans in life sciences, asset-based lending, and lender finance areas with significant barriers to entry and areas in which MidCap has expertise Current Portfolio Asset Mix (1) Target Portfolio Asset Mix Life Sciences & Asset Based Other 3% 4% Existing Specialty (2) Verticals 23% Corporate Lending 51% Life Sciences, Asset-Based Lending and Lender Finance ~20% to 25% Existing Specialty (2) Verticals and Other ~7% Corporate Lending ~ 50% 60% Aircraft Leasing 19% Aircraft Leasing ~15% (1) As of June 30, On a fair value basis. (2) Existing specialty verticals includes oil & gas, renewables, shipping and structured credit. 17

19 Comprehensive Approach to Originations We believe that Apollo has one of the largest and most diverse origination teams in the marketplace covering a diverse array of end markets Origination Channels Direct Origination Financial Sponsors AINV has completed transactions with 100+ different sponsors AINV and MidCap unified calling effort into financial sponsors Ability to offer full suite of products increases relevancy Corporate Lending Niche Markets Specialized industry expertise in areas with high barriers to entry AINV and MidCap specialized teams AINV has access to all MidCap specialized teams Life Sciences, ABL, Lender Finance and Aviation Wall Street Leverage Apollo s deep relationship with Wall Street intermediaries Apollo buying power provides good access Potential source of liquidity that may be used to fund core investments Combined with the recent receipt of exemptive relief to co-invest, we believe that the Apollo platform is one that very few alternative asset managers can compete against 18

20 Apollo s Direct Lending Suite We believe the Apollo platform has one of the broadest suites of direct lending products in the marketplace Origination Channel Asset Yield AINV MidCap 1 Corporate Lending Senior 4% 6% Stretch Senior 6% 8% Junior 8% 11% Real Estate Lending 4.5% 7.5% Life Sciences Lending 9% 12% Asset Based Lending 5% 11% Lender Finance 5.5% 11.5% Aircraft Leasing (1) 11% 14% Occasional opportunities within certain asset classes will be suitable for both AINV and MidCap (3) Total Investments (in billions) $2.4 (2) $7.1 (2) Primary Mandate Senior and subordinated debt yielding ~ 8% to 12% Senior debt yielding ~ 5% to 8% (1) Investment in aviation made via Merx Aviation Finance, LLC, a wholly owned portfolio company. (2) As of June 30, (3) Co-investments that are subject to the exemptive order are to be pari-passu 19

21 Portfolio Review 20

22 Portfolio Snapshot Portfolio Key Statistics (1) Investment Portfolio (2) $2.42 bn Debt Outstanding $0.92 bn Net Assets $1.48 bn Net Leverage Ratio (3) 0.62x Net Asset Value Per Share $6.73 Structured Products and Other 6% Unsecured 7% Portfolio by Security Type (1) (2) Preferred Equity 1% Common Equity and Warrants 9% Most Recent Quarterly Dividend (4) $0.15 per share # of Portfolio Companies 84 Weighted Average Yield (5) 10.3% % Floating Rate (2) (6) 86% 2nd Lien 30% 1st Lien 47% Average Company Exposure (2) $28.8 mn Median Company Exposure (2) $17.2 mn Median EBITDA (4) $70 mn Net Leverage Through AINV Position (7) 5.5 x Interest Coverage (7) 2.7 x Market Information (8) Market Capitalization $1.31 bn Share Price $5.98 Price-to-Book 0.89x Dividend Yield at Share Price (9) 10.0% Dividend Yield at NAV (10) 8.9% Life Sciences & Asset Based 3% Existing Specialty Verticals 23% (11) Portfolio by Strategy (1) (2) Aircraft Leasing 19% Other 4% Corporate Lending 51% (1) As of June 30, (2) On a fair value basis. (3) Net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash, less foreign currencies at fair value, divided by net assets. (4) On August 3, 2017, the Board of Directors declared a dividend of $0.15 per common share to shareholders of record as of September 21, 2017 payable on October 5, (5) On total debt portfolio. At amortized cost, exclusive of investment on non-accrual status. (6) The Company has modified the reporting of its interest rate type information to be based on its corporate debt portfolio, exclusive of investments on non-accrual status. (7) Current. (8) As of September 7, (9) Most recent quarterly dividend annualized divided by share price. There can be no assurances that AINV s dividend will remain at the current level. (10) Most recent quarterly dividend annualized divided by net asset value per share. There can be no assurances that AINV s dividend will remain at the current level. (11) Existing specialty verticals includes oil & gas, renewables, shipping and structured credit. 21

23 Portfolio Snapshot (continued) Portfolio by Industry (1) (2) Fixed Rate vs. Floating Rate (1) (2) (4) Sponsored vs. Non-Sponsored (1) (2) (5) Telecommunications 2.8% Manufacturing, Capital Equipment 3.1% Other 15.9% (3) Business Services 21.7% Fixed Rate Assets 14% Sponsored 83% Metals Healthcare & Mining & Pharmaceuticals 4.5% Diversified Investment Vehicles, Banking, Finance, Real Estate 4.6% High Tech Industries 6.2% Aviation and Consumer Transport 19.2% Floating Rate Assets 86% Non-Sponsored 17% Energy Oil & Gas 6.6% Transportation Cargo, Distribution 6.8% Energy Electricity 8.6% (1) On a fair value basis. (2) As of June 30, (3) Other consists of: Chemicals, Plastics & Rubber; Insurance; Aerospace & Defense; Utilities Electric; Consumer Goods Durable; Automotive; Advertising, Printing & Publishing; Food & Grocery; Hotel, Gaming, Leisure, Restaurants; Containers, Packaging & Glass; Retail; Media Diversified & Production; and Metals & Mining. (4) The Company has modified the reporting of its interest rate type information to be based on its corporate debt portfolio, exclusive of investments on non-accrual status.. (5) The Company has modified the reporting of its sponsored / non-sponsored percentages. The reporting of its sponsored / non-sponsored percentages is calculated using the Company s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities. 22

24 Portfolio Concentration Top Ten Portfolio Companies (1) Top Ten Industries (1) Rank Portfolio Company Fair Value % of Portfolio 1 Merx Aviation Finance, LLC $ 462, % 2 U.S. Security Associates Holdings, Inc. 135, % 3 Solarplicity Group Limited (f/k/a AMP Solar UK) 131, % 4 Spotted Hawk 85, % 5 MSEA Tankers LLC 71, % 6 Glacier Oil & Gas Corp. (f/k/a Miller Energy Resources, Inc.) 57, % 7 Skyline Data, News and Analytics LLC (Dodge) 53, % 8 Access Information 50, % 9 Maxus Capital Carbon SPE I, LLC (Skyonic) 50, % 10 My Alarm Center, LLC 44, % Top Ten Total $ 1,143, % Other 1,272, % Total Portfolio $ 2,416, % Rank Industry Fair Value % of Portfolio 1 Business Services $ 524, % 2 Aviation and Consumer Transport 462, % 3 Energy Electricity 207, % 4 Transportation Cargo, Distribution 165, % 5 Energy Oil & Gas 159, % 6 High Tech Industries 149, % 7 Diversified Investment Vehicles, Banking, Finance, Real Estate 111, % 8 Healthcare & Pharmaceuticals 109, % 9 Manufacturing, Capital Equipment 74, % 10 Telecommunications 66, % Top Ten Total $ 2,032, % Other 384, % Total Portfolio $ 2,416, % Average Position Size, at fair value ($ in millions) $32.3 $31.1 $29.7 $26.9 $28.8 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 (1) Top ten companies and top ten industries based on market value as of June 30,

25 Portfolio Company Credit Quality Median LTM EBITDA ($ in millions) Net Leverage through AINV Position (weighted average by cost) Total Cash Interest Coverage (weighted average by cost) $86 $75 $66 $ x 2.7 x 2.7 x 5.6 x 5.4 x 5.4 x 5.5 x 2.5 x Jun-16 Jun-17 Jun-16 Jun-17 Jun-16 Jun-17 At Close Current At Close Current At Close Current Source: Company data. Includes all portfolio company investments except structured products, common equities, warrants and investments on non-accrual status. Also excludes select investments where debt-to-ebitda is not a relevant or appropriate metric, or data is not available. 24

26 AINV Investment Process Deal Sourcing Underwriting & Due Diligence Structuring, Pricing & Approval Portfolio Monitoring Multi-Channel Sourcing Engine Focus on Risk-Adjusted Returns Protect Downside Risk Comprehensive and Regular Review and Dialogue Experienced investment team Ability to execute direct / non-sponsor transactions with a focus on specialty verticals Financial sponsors Long-term relationships Transactions with > 100 sponsors 83% of corporate portfolio is sponsorbacked (1) (2) (3) Limited origination restrictions Apollo affiliation Coverage and experience Market insights Proprietary research Apollo s credit segment AUM ~$151 billion (2) (4) Risk-adjusted investment philosophy Preservation of capital Strong asset coverage Extensive due diligence Knowledge sharing across Apollo platform Access to management teams of private equity portfolio companies Draft term sheet Investment Committee review Iterative process Negotiate transaction Structuring and terms Typical forms include: strong covenants, collateral package, prepayment protection, Board seat or observation rights Seek Investment Committee approval Weekly meetings to discuss and vote on new deals Comprised of senior personnel from across Apollo Extensive quarterly portfolio reviews Internal risk rating system Covenant compliance Board observation rights Independent third party valuation for non-quoted investments Offer to provide managerial assistance Increased monitoring of problem investments Dedicated professionals for managing problem investments Watch list committee Weekly review of watch list (1) On a fair value basis. (2) As of June 30, (3) The Company has modified the reporting of its sponsored / non-sponsored percentages. The reporting of its sponsored / non-sponsored percentages is calculated using the Company s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities. (4) See definition of AUM at beginning of presentation. 25

27 Aircraft Leasing In 2012, AINV founded a wholly owned portfolio company - Merx Aviation Finance ( Merx ) - to participate in aircraft leasing. Merx currently represents 19.2% of AINV s portfolio (1) Favorable Industry Fundamentals Healthy global passenger traffic expected to continue Since the 1970 s, air traffic has roughly doubled every 15 years (2) During the past 20 years global passenger traffic has expanded at an average annual growth rate of 5.1%, while global GDP grew by an average annual rate of 3.7% over the same period. (3) Global fleet growth Strong demand for leased aircraft driven by movement of aircraft off of airlines balance sheets to lessor balance sheets Rational OEM supply Long technology cycles Investment Thesis / Strategy Focus on the most liquid and in-demand aircraft Generally targeting used current generation Boeing and Airbus commercial aircraft Older aircraft transactions expected to be protected by the underlying metal value of the aircraft Deploying an opportunistic, transaction driven strategy while leveraging strong relationships and specialized knowledge creates attractive investment opportunities Continually optimize portfolio through aircraft acquisitions and dispositions Maintain a highly diversified portfolio in terms of aircraft type, lessee, geography Airlines prospering Traditional capital providers to the space (other than new deliveries) have been pulling back Lack of central clearinghouse for aircraft trading causes market to be inefficient High barriers to entry (1) As of June 30, At fair value. (2) Source: Airbus. (3) Source: IATA 26

28 Merx is Well-Diversified Merx Portfolio (1) Aircraft by Type (1) (2) Aircraft by Region (1) (2) 71 aircraft 12 aircraft types A E-190 2% 2% B ER 2% B % E-170 1% Australia Middle 5% Africa 5% East 3% 43 lessees in 23 countries Weighted average age of aircraft ~8.3 years Weighted average lease maturity ~5.1 years E-195 3% A % A % A % LRF 6% A % B % Europe 16% LATAM 18% Asia 33% North America 20% 2 Staggered Lease Maturity (1) Aircraft Value by Lessee (1) (2) Revenue by Lessee # of leases maturing by year Lessees Each < 2% 2% 2% 32% 43 Lessees 2% 2% 2% 2% 3% 3% 7% 6% 6% 3% 3% 3% 3% 6% 4% 4% 4% 43 Lessees 7.1% (1) (3) 6.2% 6.2% (1) As of June 30, 2017 Based on calendar year. (2) Based on base value. (3) Revenue for next four quarters. For more information about Merx, please visit 27

29 Conclusion 28

30 Reasons to Own AINV Apollo affiliation provides significant benefits Origination platform is highly differentiated versus other market participants Receipt of exemptive relief to co-invest enhances competitive positioning Strategy designed to deliver consistent shareholder returns and a stable NAV Strong balance sheet and diverse funding sources 29

31 Appendices 30

32 Net Leverage Ratio (1) 1.00 x 0.90 x Previous Upper Target ~ 0.75x 0.80 x 0.70 x Upper Target ~ 0.70x 0.66 x 0.63 x 0.66 x 0.62 x 0.60 x Lower Target ~ 0.60x 0.55 x 0.50 x 0.40 x 0.30 x 0.20 x 0.10 x 0.00 x Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Net Leverage Ratio Target Range Previous Upper Target (1) Net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash, less foreign currencies at fair value, divided by net assets. 31

33 AINV / MidCap Product Overlap Asset Based Secured loans to manufacturing, distribution, retail and services companies Core product consists of revolvers advancing against accounts receivable and inventory; will selectively include term loans against fixed assets or as supported by cash flow High-touch asset class requiring liquidity for daily revolver fundings, collateral evaluation and diligence expertise, borrowing base monitoring capabilities and complex cash dominion structures Leverages MidCap s in-place portfolio and collateral monitoring infrastructure Life Sciences Low loan-to-value loans, covered by material asset values and cash on hand, made to borrowers in product development (e.g., biotech companies) or early commercialization Enterprise value loans Niche market with what we believe to be disproportionate risk reward almost no historical losses across market Typically have multiple sources of exit including strong equity support, well funded balance sheets, and liquidation value No underwriting of science only of cash support and development timeline Lender Finance Senior secured facilities made to lenders in various industries (consumer and commercial) secured by their underlying collateral Typically benefit from multiple levels of credit support and protection in addition to support of underlying borrowers Defined eligibility criteria or loan-by-loan approval, borrowing base structure with ability to remove specific assets, and corporate and/or personal recourse with various restrictive covenants Highly structured transactions skewing towards larger commitments ($25+ million) to provide diversification of underlying collateral Significant opportunities exist to fill the capital void left by large banks exiting and descaling in this asset class 32

34 Financial Highlights ($ in thousands, except per share data) 1Q'18 4Q'17 3Q'17 2Q'17 1Q'17 Operating Results (1) Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 Net investment income $ 33,320 $ 37,290 $ 36,352 $ 39,537 $ 36,064 Net realized and change in unrealized gains (losses) (4,539) (29,238) (25,062) 1,577 (78,149) Net increase (decrease) in net assets resulting from operations $ 28,781 $ 8,052 $ 11,290 $ 41,114 $ (42,086) Net investment income per share $ 0.15 $ 0.17 $ 0.17 $ 0.18 $ 0.16 Net realized and change in unrealized gain (loss) per share (0.02) (0.13) (0.12) 0.00 (0.35) Earnings (Loss) per share - basic $ 0.13 $ 0.04 $ 0.05 $ 0.18 $ (0.19) Distribution recorded per common share $ 0.15 $ 0.15 $ 0.15 $ 0.15 $ 0.20 Select Balance Sheet and Other Data Investment portfolio (at fair value) $ 2,416,579 $ 2,316,708 $ 2,526,333 $ 2,548,568 $ 2,617,714 Debt outstanding $ 920,674 $ 848,449 $ 1,033,958 $ 1,014,794 $ 1,098,977 Net assets $ 1,477,624 $ 1,481,797 $ 1,506,699 $ 1,541,938 $ 1,552,409 Net asset value per share $ 6.73 $ 6.74 $ 6.86 $ 6.95 $ 6.90 Debt-to-equity ratio 0.62 x 0.57 x 0.69 x 0.66 x 0.71 x Net leverage ratio (2) 0.62 x 0.55 x 0.66 x 0.63 x 0.66 x Weighted average shares outstanding 219,694, ,694, ,168, ,835, ,940,769 Shares outstanding 219,694, ,694, ,694, ,994, ,067,696 Number of portfolio companies, at period end Weighted Average Yields, at period end (3) Secured debt 10.2% 10.2% 10.9% 11.0% 11.0% Unsecured debt 11.1% 11.1% 10.7% 10.8% 10.8% Total debt portfolio 10.3% 10.3% 10.9% 11.0% 11.0% (1) Numbers may not sum due to rounding. (2) The Company s net leverage ratio is defined as debt outstanding plus payable for investments purchased, less receivable for investments sold, less cash, less foreign currencies, divided by net assets. (3) On a cost basis. Exclusive of investments on non-accrual status. 33

35 Summary Investment Activity ($ in thousands) 1Q'18 4Q'17 3Q'17 2Q'17 1Q'17 Portfolio Activity (1) Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 Investments made $ 342,036 $ 149,408 $ 201,309 $ 127,629 $ 122,718 Investments sold (9,949) (38,393) (17,114) (17,924) (146,040) Net investment activity before repayments $ 332,087 $ 111,015 $ 184,195 $ 109,705 $ (23,322) Investments repaid (241,998) (306,449) (178,208) (197,130) (193,376) Net investment activity $ 90,089 $ (195,434) $ 5,987 $ (87,425) $ (216,698) Number of portfolio companies, at beginning of period Number of new portfolio companies Number of exited portfolio companies (13) (12) (10) (5) (13) Number of portfolio companies, at period end Number of investments in existing portfolio companies Yield on Activity (2) Yield on investments made 10.3% 9.8% 10.1% 10.3% 10.8% Yield on sales and repayments 11.3% 9.9% 10.5% 10.7% 10.5% (1) Numbers may not sum due to rounding. (2) Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status. 34

36 Quarterly Investment Activity Investment Activity ($ in millions) Portfolio Yield (1) (2) $342 $123 $128 $201 $ % 11.0% 10.9% 10.3% 10.3% ($146) ($193) ($18) ($17) ($38) ($10) ($197) ($178) ($242) ($306) Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 New Investments Sales Repayments Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Net Investment Activity ($ in millions) Yield on Investment Activity (2) (3) 13.1% $90 $6 ($87) ($217) ($195) Jun-16 Sep-16 Dec-16 Mar-17 Jun % 11.4% 10.7% 10.4% 10.2% 10.8% 10.3% 10.3% 10.1% 9.9% 9.9% 9.8% 9.4% 8.8% Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 New Investments Sales Repayments (1) Weighted average yield on total debt portfolio on a cost basis at period end, exclusive of investments on non-accrual status. (2) Change in terms on investments may impact the weighted average yield of the total debt portfolio but are not reflected in new, sold or repaid investments. (3) Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status. 35

37 Detailed Quarterly Investment Activity ($ in thousands) 1Q'18 4Q'17 3Q'17 2Q'17 1Q'17 Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 Purchases (1) First lien (2) $ 236,735 $ 52,018 $ 34,174 $ 55,021 $ 58,225 Second lien 103,819 92, ,657 51,154 46,476 Total secured debt 340, , , , ,700 Unsecured debt - 2,499 12,713 5,154 - Structured products and other ,301 11,270 Preferred equity Common equity/interests and warrants 1,481 2, ,748 Total Purchases $ 342,036 $ 149,408 $ 201,309 $ 127,629 $ 122,718 Yield at Cost on Debt Purchases (3) First lien 10.3% 9.2% 10.0% 10.5% 11.2% Second lien 10.3% 10.2% 10.3% 10.0% 10.3% Total secured debt 10.3% 9.8% 10.2% 10.3% 10.8% Unsecured debt N/A 8.0% 8.5% 10.2% N/A Preferred equity N/A N/A N/A N/A N/A Yield at Cost on Debt Purchases 10.3% 9.8% 10.1% 10.3% 10.8% Sales and Repayments (1) First lien (2) $ 136,063 $ 52,662 $ 22,904 $ 26,172 $ 89,874 Second lien 53,838 96,892 35, , ,586 Total secured debt 189, ,554 58, , ,459 Unsecured debt - 92,836-4,461 13,473 Structured products and other 33,166 55,102 96,647 48,239 31,561 Preferred equity , ,016 Common equity/interests and warrants 28,879 47,350 3,016 7,298 62,907 Total Sales and Repayments $ 251,947 $ 344,842 $ 195,322 $ 215,054 $ 339,416 Yield at Cost on Debt Sales and Repayments (3) First lien 12.0% 9.3% 10.5% 10.3% 12.1% Second lien 9.7% 10.1% 9.6% 10.8% 9.8% Total secured debt 11.3% 9.8% 9.9% 10.7% 10.6% Unsecured debt N/A 10.0% N/A 12.0% 9.4% Preferred equity N/A N/A 11.5% 4.0% 4.0% Yield at Cost on Debt Sales and Repayments 11.3% 9.9% 10.5% 10.7% 10.5% Yield at Cost on Sales 9.4% 10.2% 8.8% 13.1% 11.9% Yield at Cost on Debt Repayments 11.4% 9.9% 10.7% 10.4% 9.9% (1) Numbers may not sum due to rounding. (2) First lien purchases include revolver drawdowns; first lien sales and repayments includes revolver repayments. (3) Yield on activity is for debt investments and excludes select short-term trades and investments on non-accrual status. 36

38 Net Asset Value ($ in thousands, except per share data) 1Q'18 4Q'17 3Q'17 2Q'17 1Q'17 Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 Per Share NAV, beginning of period $ 6.74 $ 6.86 $ 6.95 $ 6.90 $ 7.28 Net investment income Net realized and change in unrealized gain (loss) (0.02) (0.13) (0.12) 0.00 (0.35) Net increase (decrease) in net assets resulting from operations (0.19) Repurchase of common stock Distribution recorded (0.15) (0.15) (0.15) (0.15) (0.20) NAV, end of period Total NAV, beginning of period $ 1,481,797 $ 1,506,699 $ 1,541,938 $ 1,552,409 $ 1,645,581 Net investment income 33,320 37,290 36,352 39,537 36,064 Net realized and change in unrealized gains (losses) (4,538) (29,238) (25,062) 1,577 (78,150) Net increase (decrease) in net assets resulting from operations 28,781 8,052 11,290 41,114 (42,086) Repurchase of common stock - - (13,575) (18,270) (6,073) Distributions recorded (32,954) (32,954) (32,954) (33,315) (45,013) NAV, end of period $ 1,477,624 $ 1,481,797 $ 1,506,699 $ 1,541,938 $ 1,552,409 Net Asset Value Per Share $6.90 $6.95 $6.86 $6.74 $6.73 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Numbers may not sum due to rounding. 37

39 Portfolio as of June 30, 2017 By Asset Class (1) Fixed Rate vs. Floating Rate (1) (2) Preferrred equity, common equity/interests and w arrants 9% Structured products and other 6% Unsecured debt 7% Floating Rate Assets 86% Fixed Rate Assets 14% Secured debt 78% By Industry (1) (3) Sponsored vs. Non-sponsored (1) (4) Telecommunications 2.8% Manuf acturing, Capital Equipment 3.1% Other 15.9% Business Serv ices 21.7% Nonsponsored 17% Healthcare & Pharmaceuticals 4.5% Div ersif ied Investment Vehicles, Banking, Finance, Real Estate 4.6% High Tech Industries 6.2% Transportation Energy Oil & Gas Cargo, Distribution 6.6% 6.8% Av iation and Consumer Transport 19.2% Energy Electricity 8.6% Sponsored 83% (1) On a fair value basis. (2) The Company has modified the reporting of its interest rate type information. The interest type information is calculated using the Company s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status. (3) Other consists of: Chemicals, Plastics & Rubber; Insurance; Aerospace & Defense; Utilities Electric; Consumer Goods Durable; Automotive; Advertising, Printing & Publishing; Food & Grocery; Hotel, Gaming, Leisure, Restaurants; Containers, Packaging & Glass; Retail; Media Diversified & Production; and Metals & Mining. (4) The Company has modified the reporting of its sponsored / non-sponsored percentages. The reporting of its sponsored / non-sponsored percentages is calculated using the Company s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities. 38

40 Portfolio Composition ($ in thousands) 1Q'18 4Q'17 3Q'17 2Q'17 1Q'17 Portfolio Composition, measured at fair value ($) Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 First lien $ 1,140,215 $ 1,049,232 $ 1,052,890 $ 1,060,606 $ 1,055,120 Second lien 734, , , , ,203 Total secured debt $ 1,875,161 $ 1,734,500 $ 1,736,748 $ 1,620,388 $ 1,702,323 Unsecured debt 162, , , , ,136 Structured products and other 135, , , , ,443 Preferred equity 25,754 25,637 30,785 67,602 67,538 Common equity/interests and warrants 217, , , , ,274 Total investment portfolio $ 2,416,579 $ 2,316,708 $ 2,526,333 $ 2,548,568 $ 2,617,714 Portfolio Composition, measured at fair value (%) First lien 47% 45% 42% 42% 40% Second lien 30% 30% 27% 22% 25% Total secured debt 78% 75% 69% 64% 65% Unsecured debt 7% 7% 10% 9% 9% Structured products and other 6% 7% 9% 12% 12% Preferred equity 1% 1% 1% 3% 3% Common equity/interests and warrants 9% 10% 11% 12% 11% Portfolio Composition by Strategy, measured at fair value (%) Core strategies (1) 74% 71% 66% 61% 59% Non-core strategites (2) 23% 24% 29% 34% 35% Legacy & Other 4% 5% 5% 5% 6% Interest Rate Type, measured at fair value (3) Fixed rate % 14% 16% 16% 21% 23% Floating rate % 86% 84% 84% 79% 77% Sponsored / Non-sponsored, measured at fair value (4) Sponsored % 83% 86% 86% 84% 86% Non-sponsored % 17% 14% 14% 16% 14% (1) Core strategies include corporate lending, aviation, life sciences, asset based and lender finance. (2) Non-core strategies include oil & gas, structured credit, renewables, shipping and commodities. (3) The Company has modified the calculation of its interest rate type information. The interest type information is calculated using the Company s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status. Prior periods have been modified to reflect this definition. (4) The Company has modified the reporting of its sponsored / non-sponsored percentages. The reporting of its sponsored / non-sponsored percentages is calculated using the Company s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping and commodities. Prior periods have been modified to reflect this definition. 39

41 Credit Quality As of June 30, 2017, 1.9% of total investments at amortized cost, or 1.1% of total investments at fair value, were on non-accrual status. ($ in thousands) 1Q'18 4Q'17 3Q'17 2Q'17 1Q'17 Jun-17 Mar-17 Dec-16 Sep-16 Jun-16 Investments on Non-Accrual Status Non-accrual investments at amortized cost $ 46,430 $ 183,141 $ 236,453 $ 312,955 $ 339,970 Non-accrual investments / total portfolio, at amortized cost 1.9% 7.0% 8.2% 11.1% 11.8% Non-accrual investments at fair value $ 27,458 $ 68,571 $ 65,587 $ 99,521 $ 118,292 Non-accrual investments / total portfolio, at fair value 1.1% 3.0% 2.6% 3.9% 4.5% Portfolio Company Credit Metrics (1) Net Leverage (Close) 5.4 x 5.5 x 5.6 x 5.6 x 5.6 x Net Leverage (Current) 5.5 x 5.5 x 5.7 x 5.5 x 5.4 x Interest Coverage (Close) 2.7 x 2.5 x 2.4 x 2.5 x 2.5 x Interest Coverage (Current) 2.7 x 2.5 x 2.5 x 2.6 x 2.8 x ($ in thousands) Industry Cost Fair Value Investments on Non-Accrual Status as of June 30, 2017 Magnetation, LLC Metals & Mining $ 2,050 $ 717 Spotted Hawk Energy Oil & Gas 44,380 26,741 Total $ 46,430 $ 27,458 (1) Source: Company data. Includes all portfolio company investments except structured products, common equities, warrants and investments on non-accrual status. Also excludes select investments where debt-to-ebitda is not a relevant or appropriate metric, or data is not available. Weighted average by cost. 40

42 Diversified Funding Sources as of June 30, 2017 Debt Facilities Debt Issued / Amended Final Maturity Date Interest Rate Principal Amount Outstanding (in thousands) Senior Secured Facility ($1.14 billion) 12/22/ /22/2021 L bps $ 272,797 Senior Secured Notes (Series B) 9/29/2011 9/29/ % 16, Notes (redeemable on or after 10/15/17) 10/9/ /15/ % 150, Notes (redeemable on or after 7/15/18) 6/17/2013 7/15/ % 150, Notes 3/3/2015 3/3/ % $ 350,000 Weighted Average Annualized Interest Cost (1) & Total Debt Obligations 5.318% $ 938,797 Deferred Financing Cost and Debt Discount (18,123) Total Debt Obligations,Net of Deferred Financing Cost and Debt Discount $ 920,674 (1) Includes the stated interest expense and commitment fees on the unused portion of the Senior Secured Facility. Excludes amortized debt issuance costs. For the three months ended June 30, Based on average debt obligations outstanding. 41

43 Interest Rate Exposure as of June 30, 2017 Apollo Investment Corporation has taken several steps to prepare for higher interest rates including: increasing the floating rate portion of the portfolio and issuing fixed rate debt. Investment Portfolio (1) (2) Funding Sources (3) Floating Rate Assets 86% Fixed Rate Assets 14% Common Equity 61% Fixed Rate Debt 28% Floating Rate Debt 11% Floating Rate Debt Floor Net Investment Income Interest Rate Sensitivity (4) ($ in millions) Par or Cost % of Floating Rate Portfolio Interest Rate Floors No Floor $ % < 1.00% 26 2% 1.00% to 1.24% % 1.25% to 1.49% 87 7% 1.50% to 1.74% 9 1% > =1.75% 0 0% Total $ 1, % Annual Net Investment Income (in millions) Annual Net Investment Income Per Share Basis Point Change Up 400 basis points $ 30.9 $ Up 300 basis points $ 23.2 $ Up 200 basis points $ 15.4 $ Up 100 basis points $ 7.7 $ Down 100 basis points $ (1.0) $ (0.005) (1) On a fair value basis. (2) The Company has modified the calculation of its interest rate type information. The interest type information is calculated using the Company s corporate debt portfolio and excludes aviation, oil and gas, structured credit, renewables, shipping, commodities and investments on non-accrual status. (3) Based on total debt obligations before deferred financing cost and debt discount. (4) The table shows the estimated annual impact on net investment income of base rate changes in interest rates (considering interest rate floors for floating rate instruments) to our loan portfolio and outstanding debt as of June 30, 2017, assuming no changes in our investment and borrowing structure. 42

44 Contact Information For more information, please contact: Elizabeth Besen Investor Relations Manager Phone: (212) Gregory W. Hunt Chief Financial Officer and Treasurer Phone: (212)

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