Learn more about Apollo Investment Corporation, a BDC that trades on the NASDAQ exchange.
Apollo Investment Corporation history
- 1990 — Leon Black founds Apollo Global Management, a private equity firm. Its early funds launched with impressive results. Its early funds, named Fund I, Fund II, and MIA, returned a combined net IRR of 37% from inception to disposition of their final investment in 2004.
- 2004 — Apollo Investment Corporation files for an IPO. Apollo wants to expand its investor base, and a retail-oriented business development company is seen as an ideal way to do so. It files with the SEC to launch Apollo Investment Corporation, which will feed on deal flow from Apollo’s vast private-equity empire. The company files to sell 62 million shares of stock at $15.00 per share, of which the underwriters will receive about $0.94 in fees per share. A “blank check” IPO, Apollo Investment Corporation did not have any investments at the time of its offering. The BDC is structured similar to many other BDCs with a 2-and-20 fee structure that rewards management with a fee of 2% of assets plus 20% of any income in excess of a 7% return on equity, subject to a catch-up provision.
- 2005-2007 — Apollo Investment is off to a fast start. Its investments are performing well, and the company shows substantial early gains on its investments, both realized and unrealized. Its impressive performance leads the way for Apollo Investment to raise capital quickly. With just over $800 million in assets at IPO, additional equity raises and leverage allow the company to grow to more than $3.5 billion in assets by March 2007. Shares offered at prices above NAV compound on its growing net asset value, and the business appears like a true high-yield home run.
- 2007 — Overconfidence leads to a big real estate bet on Innkeepers USA. Real estate prices are surging, and Apollo Investment makes a huge investment by purchasing a publicly-traded real estate investment trust, Innkeepers USA, in a $1.5 billion deal. The REIT owns a collection of hotels that operate as Residence Inns, Summerfield Suites, and Hampton Inns. A press release shows the scale of this transaction, stating that “Innkeepers USA Trust owns 74 hotels with a total of 9,808 rooms or suites and one 355-room hotel in which it owns a 49 percent equity interest in 21 states and Washington, D.C.”
- 2008-2010 — The Financial Crisis strikes Apollo Investment. Like many BDCs in the era, Apollo Investment made the mistake of relying on credit facilities to fund its investment portfolio. When banks reduced or terminated their lines of credit, Apollo Investment needed to come up with new sources of financing, or ask equity holders to pony up. Meanwhile, its investments were deteriorating rapidly. In early 2010, trouble at Innkeepers USA was well publicized, as headlines read about a future Chapter 11 filing. Apollo Investment also sought and received approval to issue stock below net asset value per share, and issuance in the 2010 fiscal year wiped $0.33 per share from net asset value. Poor investment performance was the real problem. In fiscal 2009, the company reported that losses on its investment portfolio ate up $4.26 of NAV per share.
- 2011-2013 – Apollo Investment begins to work through its financial crisis losses. Shares begin to trade above net asset value and the company diversifies its investment portfolio. It begins to add investments in a number of new industries, from energy to aviation. In September 2012, it founded Merx Aviation, a company that will buy and lease aircraft to commercial operators. Like other BDCs, it also adds CLO equity to the portfolio, which bolsters its returns thanks to the leverage in CLO securities.
- 2013-2015 — Apollo gets drunk on Oil & Gas. Just as it invested in real estate at the peak less than a decade before, AINV loads up on speculative domestic O&G investments just as oil prices strike relative highs. The company reports in its fiscal 2015 filing as of March 31, 2015 that 13.4% of its investment portfolio is dedicated to O&G investments. The company will begin to realize losses on its oil and gas investments, it’s second big underwriting error since its disastrous Innkeepers USA investment in 2007.
- 2016 — A “new” Apollo Investment Corporation. AINV announces that the days of high volatility investment strategies are over, suggesting that it will seek to prioritize lower-yielding debt investments rather than higher-yielding equity investments. It also shows its commitment to shareholders by making good on its share repurchase programs to buy back stock below NAV.