Fitch Affirms Apollo Investment Corp's Ratings at 'BBB'; Outlook Revised to Stable
2009-10-21 15:57:04 -
Fitch Ratings has affirmed the ratings of Apollo Investment Corporation (Apollo) as follows.
--Long-term Issuer Default Rating (IDR) at 'BBB';
--Senior secured debt at 'BBB'.
Approximately $1.1 billion of debt is affected by this action. The Rating Outlook is revised to Stable from Negative.
The ratings affirmation reflects Apollo's low leverage, demonstrated access to the capital markets, increased cushion on asset coverage,
consistent operating performance in a very difficult market environment, moderate portfolio investment concentrations, experienced management, and the company's access to deal flow and investment resources from asset manager, Apollo Global Management, LLC. Rating constraints reflect the company's relatively short operating history, limited funding flexibility, capital markets impact on leverage, dependence on the capital markets to fund portfolio growth, and inability to retain capital due to dividend requirements.
The Outlook revision reflects the ability of the company to maintain compliance with asset coverage requirements in a very difficult capital markets environment. Apollo retained a meaningful cushion above its asset coverage requirements and financial covenants throughout fiscal 2009, despite recognizing $734.5 million of unrealized portfolio depreciation. The asset coverage ratio was 234.7% at June 30, 2009, up from 232% in the prior quarter.
In addition, Apollo was able to access the equity markets for the first time in over a year in August 2009, netting $173 million in proceeds.
Fitch believes the investment capital provides Apollo with a competitive advantage, as it will have the ability to take advantage of attractive investment opportunities while many competitors continue to focus on capital preservation.
The recognition of unrealized portfolio depreciation that results in a reduction in asset coverage below 205% and/or deterioration of the company's asset quality or liquidity profile could prompt a ratings downgrade. However, Fitch believes the achievement of consistent operating performance, the recognition of modest realized portfolio gains over time, the reversal of a meaningful portion of the unrealized portfolio depreciation recorded to date, sustainable cash income coverage of the dividends, an improvement in asset quality metrics, and an increase in funding flexibility would serve to enhance the company's financial profile.
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Fitch Ratings, New YorkMeghan (Crowe) Neenan, CFA, +1-212-908-9121Sadia
Afridi, +1-212-908-0327Media RelationsBrian Bertsch,
+1-212-908-0549
brian.bertsch@fitchratings.com : mailto:brian.bertsch@fitchratings.com
