Good morning and welcome to Apollo Investment Corporation’s second fiscal quarter 2010 earnings conference call. (Operator Instructions). It is now my pleasure to turn the call over to Mr. Jim Zelter, Chief Executive Officer of Apollo Investment Corporation. Mr. Zelter, you may begin your conference.

Thank you and good morning. I am joined today by Patrick Dalton, Apollo Investment Corporation’s President and COO and Richard Peteka, our Chief Financial Officer. Rich, before we begin, would you start off by disclosing some general conference call information and include the comments about forward-looking statements?

Sure. Thanks, Jim. I'd like to remind everyone that today’s call and webcast are being recorded. Please note that they are the property of Apollo Investment Corporation and that any unauthorized broadcast in any form is strictly prohibited. Information about the audio replay of this call is available in our earnings press release. I would also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking information. Today’s conference call and webcast may include forward-looking statements and projections and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections. We do not undertake to update our forward-looking statements or projections unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.apolloic.com, or call us at 212-515-3450. At this time, I’ll turn the call back to our Chief Executive Officer, Jim Zelter.

Thanks, Rich and good morning. The September 2009 quarter saw the US equity markets continue their strong rebound. The S&P index gained 16%, while the Russell 2000 Financial Services Index advanced 18%. The broad credit markets also improved during the quarter with the CS Leveraged Loan Index returning 10% and the CS High Yield Index almost 14%. Clearly, cost cutting and productivity gains have led to greater than expected profits and had positioned many companies for increased margins as they slowly move out of the recession. We also believe that improvement in the trend of (inaudible) is critical as consumer confidence may spur further increases to consumer spending. Recently, various leading economic indicators have shown signs of improvement and together with the steepening yield curve helping to recharge financial sector profitability, there is optimism that the economy will continue to move forward and slowly grind out of the recession. Given the above, we believe that the quarter-ended September 2009 was one of continued stability, methodical actions and progress for Apollo Investment Corporation. During the quarter, we continue to focus a significant amount of time on existing investments, together with further optimizing the portfolio where appropriate. At the same time, we became increasingly encouraged with a dialogue we are having with financial sponsors and Wall Street firms on the overall pipeline of higher quality opportunities that we was beginning to build. As a reminder, privately-negotiated transactions take time to develop due diligence and we advised our investors over the years to expect a highly-variable investment pace quarter-to-quarter. We at Apollo Investment Corporation remain an investment business, one that is managed without being captive to quarterly budgets. Again portfolio growth has been and will continue to be thoughtful, selective and only after extensive due diligence that includes lessons learned from past and…

Thank you, Jim. Let me start off with some September 30 balance sheet highlights. Our total investment portfolio had a fair value of $2.6 billion as compared to 2.5 billion at June 30. Our net assets totaled 1.68 billion at September 30, with a net asset value per share of $10.29. This compares to net assets totaling 1.44 billion at June 30 and a net asset value per share of $10.15. This $0.14 net increase in NAV per share for the quarter was driven primarily by net unrealized depreciation on our investment portfolio as well as from earnings in excess of distributions to shareholders. In addition, we had debt of 902 million on our revolving credit facility at September 30. This equates to a modest debt-to-equity ratio of 0.54 to 1 measured at fair value. Accordingly, we continue to be in compliance with all our credit facility financial covenants. As indicated in our schedule of investments, we placed certain investments in two portfolio companies on non-accrual status during the quarter. The investments were issued by Quality Home Brands and DSI Renal and they did not contribute any income for the quarter. With these additions, our portfolio of 71 companies now has 6 companies with investments on non-accrual status and they represent less than 1% of the fair value of our investment portfolio at September 30, 2009. On a cost basis, they totaled 8.6% of our investment portfolio. As for operating results, gross investment income for the quarter totaled $84.4 million. This compares to 82.6 million for the quarter-ended June 2009 and $103.5 million for the comparable September quarter a year earlier. Net operating expenses for the quarter totaled $33.0 million. This compares to $33.2 million for the June 30, 2009 quarter and $47.1 million for the comparable September 2008 quarter.…

Thanks, Rich. We believe that the September quarter marked a fundamental positive change for our business. The broad economic decline has slowed significantly and we’ve even witnessed improvements in economic activity and consumer confidence. And while various economic indicators evidenced, the things are clearly less fad, we as a lender to mid-sized businesses understand what that really means to corporate America. Therefore, we continue to expect the top-line revenues of many companies to improve at a more measured pace and believe management teams will likely remain somewhat cautious with regard to building large inventories and hiring many new employees. Not until employment changes consumer confidence in spending increases more significantly, will we expect to see meaningful advances in revenues. That said, many leading middle market companies will seek strategic growth capital which will present us with many attractive investment opportunities. Yet as always, we will remain disciplined and selective with our capital. Our brand name and relationships with middle market sponsored clients remained as strong as ever, which has afforded us a first look at many companies seeking capital. With less competition and the value of the Apollo platform well beyond just our capital, we expect there to be a significant number of highly attractive mezzanine-investment opportunities ahead. Accordingly, we’re seeing the quality improve in our growing pipeline of opportunities as we remain steadfast in our approach to being a patient, yet opportunistic investor. Now getting into our September quarterly portfolio activity, we invested $39 million in the secondary market across six existing portfolio companies. We also received $30 million in proceeds from select asset sales and prepayments. At September 30, our portfolio stood at $2.6 billion and was widely diversified by issuer and industry. Leverage stood at a conservative 0.5 to one debt-to-equity as compared to 0.74 to 1…

(Operator Instructions). Your first question comes from Sanjay Sakhrani of KBW.

Could you talk about that pipeline of investment opportunities. Are you guys closer to any deals versus others, just trying to think about portfolio growth from here on to the end term, thanks.

Certainly every day with the moves, we do get closer to new investment opportunities. When we raised our capital, it was mid to late August. When the markets come back in September, we have been having a lot of dialogue. It's not our practice to commit capital before we have sufficient capital and we are comfortable to investing, so we've been very actively speaking with sponsors. There are a number of opportunities that we find interesting and each week they're developing more and more. The timing of the closing of those transactions depends upon a lot of features. Number one; do we actually get there day-to-day on our due diligence and structuring and when does the company actually find itself for sale, if it’s a NBL process and the closing of that sale is not dictated by us, but rather by the sponsors who are buying those companies. We may commit our capital or be prepared to allocate committed capital in advance of an opportunity that will not show up into our financials until it actually closes. So, it does take some time and we go back to the last cycles, there's definitely a period of rebound followed by new M&A opportunities that hit the pipeline which take three to six months to actually go through the process. Our very diligent process of understanding and identifying which companies are most appropriate to invest in and what level and what structure, they just take time. We're very confident and happy that we have the capital. We're confident those opportunities will continue to emerge, but when they close, we really can’t dictate and that’s why you’ve seen historically, a very variable investment pace quarter-to-quarter. We are encouraged by what we are seeing develop, not only of the number, but the quality especially if we start to see the beginnings of an economic recovery, more companies will be willing to sell themselves and more buyers certainly will want to put capital forth to buy companies.

As we’ve talked about, one of the challenges that we saw three to nine months ago was going on in the loan market. As the loan market has certainly traded up and secondary prices have moved up, banks are much more willing to engage in lending on the senior part of the capital structure. There's been some clarity on that and there’s been some recent M&A announcements that were led by real extensions of bank deals. We see that not being an overwhelming issue right now. So we are seeing product. As Patrick said, we're patient, but our pipeline is very buoyant right now and there will be some opportunities that will result out of that after we go through the entire process.

Could you just touch on that GAAP that you guys talked about between current income and the dividend? How should we think about it going forward? Is that gap kind of there just to give you flexibility so you don't have to kind of stretch for the growth or could you just elaborate on that?.

We're one of the few BDCs, Sanjay. We’re earning significantly more than our dividend right now. So, it allows us to be the patient-opportunity investor that you’ve described for Jim and Patrick. Mezzanine is not a quarterly business and our pipeline is building as they’ve described and we're not looking to put any amount of dollars to work on any given quarter and that provides really a strong cushion, not only for our investment pace, but also for shareholders as they look out for long-term dividend visibility.

And that’s really important, Sanjay, because when you're forced to put your money more quickly we all saw how badly that can end. So, because we get the flexibility to be patient and be very selective, that's really our long-term approach to investing.

On those two non-accruals that you guys had specifically on DSI, one part of that investment is still on accrual. Could you just go through kind of the dynamics there?

In most capital structures -- there is senior bank debt and there is some junior capital and there is some equity. Think of cash as a waterfall, to think there is enough cash to keep the senior debt covered, maybe the second lien is not covered and maybe it is covered and further down the chain. Each time we look at an investment and we go through our profits, do we believe that we're going to get collectability of that interest on that loan in that coming quarter and we have to see that analysis. So you may have higher up in the capital, there's enough cash to satisfy those obligations, but slightly low on the capital structure. They may not or we may not believe there is. And on those two situations, they are currently in a restructuring process that is uncertain of being assertive, we think there is great value to be captured over time in both those two companies. Time will tell, but quarter we have to go through that analysis.

Your next question comes from [Elisa] with Merrill Lynch.

Given your stronger capital commissioning, if you would be interested in any M&A activity involving maybe a weaker competitor?

I think this is a good time to communicate, our policy about making statements regarding any potential or pending M&A transactions by Apollo or any of our competitors. As a policy we do not make specific comments about any pending or potential M&A or other deal, and our highest priority is to provide long-term value to our shareholders and that may come in a variety type of transactions or actions we take on. So you should expect that we at Apollo have looked at and are currently looking at and will always look at every potential or pending strategic opportunity that is available in the marketplace. If and when we decide to take any action, it will be because it makes both long-term economic and strategic sense for our shareholders. It really must not overly burden our company with any excessive or undue credit risk, any financing or execution risk that may impair the long-term value. So, we have a game plan. We've executed it from day one. We won't comment publicly, but that's what people should expect as to how we will operate this capital.

Your next question comes from Vernon Plack with BB&T Capital Markets. Vernon Plack - BB&T Capital Markets: Looking at two of your larger investments, Grand Prix and Asurion. Grand Prix had a write-down during the quarter of around 22 million and Asurion was written up, could you give a quick update on how both of those companies are doing?

I will talk about Asurion first, that’s publicly quoted in Trade Security, the company did release earnings this last past week and again knocked the cover off the ball. EBITDA is double where it was when we invested. The company is performing extremely well. It had leverages in the three time areas. We are very encouraged. We'd like them to be the investor in our company for the long haul. So all good things there and that’s quote of security and actively is trading in the marketplace today. On Grand Prix, it is valued by third parties, obviously the environment in the commercial real estate continues to be challenged. Fundamentally at the company, we are seeing month-over-month and quarter-over-quarter improvements, things are less bad in each quarter, they get even less bad. However our major team is working very, very diligently. We at Apollo are very experienced with capital structure management. We'll be assertive whether it makes sense to be assertive, we are in a very strong capital position, this now is a very small position in our portfolio. It's been marked down roughly 85% on total costs, so it's the minimist on a value basis on our portfolio. However, we re spending a lot of time, we currently are trying to recover as much of that capital, potential gain the future if that’s available to us and our management team is doing a terrific job down there everyday with all of our 75 plus hotels working to generate more revenue in RevPAR and the industry is getting better than it was, but still it's far away from where it was a couple years ago. Vernon Plack - BB&T Capital Markets: So things are getting better, but you did write it down?

It was written down by third parties because of some of the assumptions they use in their models to write down. The current environment for commercial real estate is still challenged, it's also driven by supply and demand of capital as much as its fundamental performance. We all see what's going on in the commercial real estate in CMBS markets broadly speaking. That's really some fundamental inputs going into the cost of capital and the volatility, which generate value in a common equity through an options pricing model and on the fundamental return on the DCF. Vernon Plack - BB&T Capital Markets: What’s your thoughts regarding the level of non-accruals, there tends to be a lagging indicator and we're seeing that number and we’re seeing a few management teams actually expect to see that number going higher even though things in the macro picture is at least stabilizing, perhaps getting better. What are your thoughts there? Do you think non-accrual is going to trend higher for a while?

We agree that nonaccruals historically have been a lagging indicator. We are doing the very best we can proactively to avoid that. We are disappointed that they are nonaccruals. What most of our competitors show is risk ratings on fair market value. We have been using on a cost basis because that’s how we run the company and how we feel about losing money and so that's actually 2.1 times on a fair market value. It is a demonstration that the fair value of our portfolio is accurate. We have measured and we believe we may see more. There's always going to be bumps along the road. The duration of the cycle has been a couple years in now. As we talked about some of the modest and measured improvements on top line that are emerging, that's a good sign. Our companies have done a great job in dropping costs and productivity gains within companies. Margins should expand further as revenue top lines come, but we're not yet ready to call that we're out of it. But if we hope to see a sustainable recovery, all we can do is build a well-capitalized business and a sustainable business model and we will do the very best we can to limit the number of nonaccruals in the portfolio.

Your next question comes from Scott Valentin with FBR Capital Markets.

In the past you’ve mentioned that targeting industries for new origination was more defensive type industries. Have that changed at all given you sound a little bit more positive on the macro economy?

That will start to emerge when we see the pipeline in new M&A activity. When companies that would come for sale today are cyclical companies, they're going to need to show a sustainable recovery post the cycle. Probably, a little early seeing companies coming to market that are cyclical, we are still seeing more companies that have shown strength and their ability to get through the last couple of years and didn’t really suffer a significant downdraft, but are more resilient and maybe a couple quarters from now when companies can demonstrate and prove. You've seen it in the high-yield markets, some new originations in the high yield are for company that may have been more cyclical, but is showing an emergence of a recovery and more of the fundamental M&A environment for company's selling, a buyer needs to see that the business is truly coming out of the trough and that the economy is coming out of the trough. So, we expect to still see more defensive in the pipeline and aggregate than we do the cyclical coming for investment opportunities.

You mentioned earlier I think some of the interest coverage ratios and EBITDA ratios. Can you compare maybe quarter-over-quarter from a year ago, are they stable or they deteriorating a little bit?

They're starting to stabilize more. We are well higher than we were a couple of years ago when the first cycle started, but we are pleased that it never really got down below two and it started to show some trending up, net of course of the one or two situations that have been through a duration and have to go through a restructuring plan or some of that liquidity that's providing these companies starts to get squeezed if you are re-pricing your debt capital structures, but it is an encouraging sign.

Your next question comes from Chris Harris of Wells Fargo.

Can you comment a little bit on some of the terms that you're seeing with these new opportunities and I'm interested in getting an idea of what yields on new opportunities look like?

I'm glad you asked the question because it really goes to our fundamental approach of how we approach the business and asset-liability matching. Now we spend all of our time really focusing on the portfolio and the capital structure and our cost of capital. The lower the cost of our capital, both from the debt and equity. When we raise equity, it provides us with the flexibility to not have to stretch. If you're taking high yields as a means to generally earnings to pay dividend that's risk, because the risk-adjusted returns of that are much higher. We'd rather see our yields stay the same if not even tighten because the quality of our investments will improve. So, we're constantly looking at our cost of capital today and expect in the future and as a means to be accretive in investment opportunities we see without using leverage to get return or stretching for equity risk, we look at a risk adjusted basis. So as long as it's accretive, the yields will bounce around a little bit on based on the online company itself, its structure and where we are on the capital structure, but we don’t need to stretch for yield.

With respect to your balance sheet here, you guys have clearly got your leverage down quite a bit on a sequential basis. Now that the economy and things are beginning to improve, how aggressive you are going to be with releveraging the balance sheet or do you feel pretty comfortable with where you are now?

We think there's definitely opportunity since we delevered with the equity raise from 0.74 to 0.54. Our comfort level has been historically and it hasn’t changed, is up to around 0.75 to 1. Our lenders are very important to us. I think they understand that we run the business conservatively in a very, very difficult cycle. Once we approach 0.75 area, historically we've raised equity and deleveraged and then redeployed that capital overtime. Right now, we got a nice cushion between where we are today and where our comfort levels start to get a little stretched.

Your next question comes from Don Fandetti of Citigroup.

It sounds like the deal flow is picking up in the industry, are you seeing increased competitors or capital coming in?

Broadly speaking, there's less competition which is a good thing. A lot of the faster money that was in the market through either hedge funds or CLOs that were doing second liens type securities have left the marketplace. New BDCs were on offer and came to market, but none have gotten done. We welcome more people in the space. We think it's a great space to be in for disciplined competitors because you can go around with the right folks in the business. We are seeing less competition, we do see competition for the companies of our size. There's a lot of excess cash right now in the high-yield market with very limited supply in the last quarter. That's great to see because that will show that the secondary markets will trade up in good levels. We'll get more discovery on where pricing should be for the larger-type credits and that may get absorbed because I’ve seen a lot of new money coming into credit funds or the mezzanine funds or other BDCs at the moment. We're excited about the competitive landscape especially the size of companies that we are attracted to.

Your next question comes from John Stilmar of Suntrust.

Can you provide a little more color on the portfolios of your existing investments. Were they purchased in secondary market open purchases or were they direct investments into your portfolio company?

In the 3rd quarter those were all secondary. There were no direct investments into portfolio, those were opportunistic secondary market purchases. John, it doesn't mean that we won't from time to time do that in support of the companies we like. These new money investments, we will look at all the time, but in that quarter, these were secondary opportunistic market purchases.

Along the same line, when we saw some early evidence of this, but can you help gauge our -- as prices start continuing to come up, can you gauge your willingness or opportunity to churn your portfolio or turn the investments by virtue of the fact that risk premiums are trying to come out of some of the names in your portfolio and that could potentially free up capital. Can you talk about the pace at which you are starting to look at those opportunities to free up capital for other investments and will that be more a function of the unlocking of the private equity deals that you're looking at or can you talk to me about the valuation process that you go through.

Right now the nice benefit is we don't have to sell anything to invest several hundred million dollars in the current market. We have a very strong balance sheet. We’ve got new capital. We’ve got fairly attractive debt capital we can use for several hundred million dollars to get to our comfort level on leverage, so we don’t have to churn anything out. We like our portfolio, it pays our dividends, the earnings off of that portfolio. We're well matched, so even if LIBOR comes down, like it has, we’re still making the same spread we made when LIBOR was 4% and 5%, so making good earnings, accretive earnings with the current portfolio. If we get to a point in time where we've invested $400 or $500 million and haven’t accessed other capital in the equity markets or haven’t gotten significant prepayments from portfolio If we get to a point in time where we've invested $400 or $500 million and haven’t accessed other capital in the equity markets or haven’t gotten significant prepayments from portfolio companies, we have that as another tool. We absolutely can cycle out names into new names and that liquidity was very important to have in the portfolio back last December in the March period. It's good to have, but we like what we own and that’s why we've been buying more, so they named the stuff that we own. If we see a credit issue coming, we may sell out for the credit reasons, but we really don’t need to access that recycled capital as a means to grow our business.

You touched on it previously with your thoughts around high-yield competition and the clear resurgence that we’ve seen in high yield bond deals, that have been supportive of the initial wave of M&A and that process was going to lead to a price discovery and then potentially [rebate] because you're not seeing new money start to flow into to the high yield funds themselves. Am I understanding that correctly and sort of what is your thought then around the cycle, because it seems like the first part is that the resurgence of high-yield has been attracting private equity to be able to facilitate more transactions. Can you talk to me a little bit more about that sort of liquid dynamics that you see over the market over the next 12 to 18 months?

What we haven't seen and it’s a great observation. A lot of the high-yield market activity has been more in the refinancing of existing companies. There’s only been a couple of situations where LBOs have come to market, we haven’t seen a regular way, LBO come to the high-yield market where there is a bridge loan, that's taken out with the high yield. People are opportunistic. The company call (inaudible) got underidden with a bridge loan, low leverage on the senior side and we're very engaged and involved there. The bank market and ultimately end up doing going to all banks, so there wasn't a high-yield deal. The benefit we have with our committed capital is when a bank gives the bridge loan, they're going to price it with potential pricing caps in the mid to high teens level. So the issuer or the borrower and sponsor doesn't have certain unit cost to capital or we can provide a certainty, but Jim talk about the flow in the high-yield market.

The [140 billion] of high-yield issuance this year, a large number of that has been proceeds that have been raised to pay down banks in what's called amend and extend. And with that you've seen your average high-yield deal around $500 million. So I think what we see happening right now, as we see a stability in the loan market, where loan prices in the secondary market are higher close to the par, low to mid 90s. Now banks will have the confidence in a mid market or larger buyout to put forth terms that make sense on the senior loan aspect of the capital structure. We somewhat compete against the high yield market for product and right now with the high yield market being very strong, it's our view that there will be opportunities for us depending on size and conditions and there will be sponsor-driven deals where those sponsors choose to issue paper to us based on our terms and conditions because of the benefits to what they want to do long-term with their company. We go back and forth with the high yield market. The fact that it's going higher is good for some of our secondary names, because we are a relative value investors, but we go through periods of investing and we're constantly harvesting. This all ties together why we don't want to have our dividend higher than our NII because you don't really invest and harvest. You're always in a rush to invest because you need to harvest that money. We have the right stability right now between our dividend and our NII. The market is coming our way, and we certainly feel very comfortable with our standing out there right now and the fact that new BDCs haven't gotten raised, these are all things that give us great confidence for how we are positioned.

Your next question comes from Jon Arfstrom with RBC capital markets.

Rich, can you talk a little bit about your approach to your revolver? You are really underutilizing it and it's not due for over six months, but maybe talk a little bit about what we can expect on that and what you expect on pricing if you want to take a stab at that?

Yes, Jon, we do have a maturity in April 2011, so we have about a year and a half left. We've been actively engaged talking to our larger lenders for the last year, on and off often times we've found that we're too far away from maturity to really get their complete focus especially with what's been going on with banks in this credit cycle. Our conversations are always cordial. We have great relations here at Apollo as a broad asset management global platform and the relationships with banks are important to us, so those dialogues are always involved, we're always talking. We're always seeing what the market's doing. It's way too early, let's not talk to a conversation that segwayed to, let's not be comp to some of the more distressed players. Some of the players may have pending maturities or players that really have small company collateral that may not be able to be monetized. So, our dialogue always is ongoing. Their positions are improving. They're more open for business and we like those trends, to the extent that we ever get to a point where we are comfortable with a transaction in the marketplace with them, either extending or modifying our current facility. We will probably do that. We've made it a habit over the last five and a half years to always raise capital when we didn't need it. Whether that be on the equity side or the debt side, you shouldn't be surprised that we're always in negotiations ahead of time and whether a deal closes or not, but we'll always look at closing on a good opportunity. As far as pricing goes, again it's kind of tough out there. There are a lot of guys that have just been having trouble and so we don't want to be [comped] to those guys, so we really don’t know what the market is right now.

If I could respectfully press you on the dividend, the gap between your NOI and your dividend this quarter is pretty wide, has that GAAP become wider and wider, how do you handle it? We saw a $0.02 raise this last quarter. Is this something that's just natural and obvious that need to continue progress upward?

We did raise equity in the middle of last quarter, it was 20.7 million shares, there was a lot of shares issued and match that with how we are a patient investor and how that next quarter the average share balance when doing per share numbers will increase by other 45 days, our average shares are going to go up next quarter. We've had some non-accruals this quarter, we are fighting for maximum recoveries. That's still not predictable and we're getting better visibility. We're working hard, but right now we've just raised our dividend. Our cost of capital is precious to us. Our weighted-average shares are going up, so you should probably expect us to remained committed to a steady stable and growing dividend over time and that’s our objective

The pipeline you're talking about, I'm assuming that would be new deals and not really secondary market deals that you're looking at?

The pipeline that we are talking about is new market deals, we are always constantly looking at secondary market. We have identified as we have over the last couple of years anything that we think we’d like to buy from a credit perspective and price points which become attractive. Given our platform, our traders are seeing flow every day of opportunities of stuff that we own. They very focused on it, we get shown opportunities. We keep a list of where we'd buy these securities or sell. We're not an IIR-driven shop so, it’s more on buy side or if it's a credit issue we may look to sell. Our pipeline that we're talking about is the one that’s more proprietary of new deals that are coming in the market

Your next question comes from Greg Mason of Stifel Nicolaus.

Could you talk a little bit about the AIC Credit Opportunities Fund. You are able to take advantage of some mispricing in the market in home loans. Are there more opportunities for that fund to be able to take advantage of market mismatch or market opportunities?

The reason why we did the AIC credit opportunities fund was not just that the loans we liked were attractive and well priced, but we really came with those loans, which is not really available anymore as the banks were so in disrepair that they needed to sell the loans and they were willing to put leverage on those loans. So we effectively got a low cost credit facility on each of the three loans. Those assets have been mostly traded up, so they're more cleared off their balance sheet, so there's not much left of high quality that we would want to buy. These three loans are particularly redeemed as very high quality and we got the financing because there was such a need to move off balance sheet. That need isn't there anymore. If someone is willing to provide us with a non-recourse LIBOR plus 150 five-year loan to buy some assets we like, we would certainly be very interested. We don't see many of those opportunities anymore, Greg.

How do you view looking at potentially long-term notes versus the long-term credit facilities you are able to negotiate in the past and does the issues with the banks change the way you look at a revolving credit facility versus potentially longer-term notes?

We have a long-term view of what the capital structure should look like and you should have a combination of both. We've been fortunate in the past to have great support from our banks and we still have that support and we have all done well together. At the same time, we have a rating. We are the only real investment grade rated vehicle right now at this point and it's our view that there are long-term opportunities for us to have a capital structure that has a nicely-sized revolver as well as potential long-term debt. We've just gotten news today that S&P has affirmed our BBB rating and with a stable outlook. It’s our view, so long-term I think our capital structure will consist of a well-placed, well-supported revolver and in time with where rates are right now for us to potentially issue long-term debt, that's a great way for us between our equity capital and our debt capital as Patrick said earlier to lock in a low cost capital overall for our company and then every incremental investment we do comes to the bottom line. So I would expect us to be prudent. We've been prudent with the amount of leverage and we're going to be prudent with floating and fixed rate term leverage in due course.

On DSI Renal, it’s on non-accrual, it looked like the cost basis increased about $21 million versus last quarter. Can you talk to us what's going on there with that cost basis?

That's just a capitalize accrued dividends, Greg.

(Operator Instructions). Your next question comes from David (inaudible).

With a significant tightening of spreads that the technical rally implied that valuations were fair, they are no longer cheap. In the third quarter, we saw the spreads continue to tighten and if I read your body language, you're a little more bullish now than you were in the second quarter, how you would reconcile the change in viewpoint?

Last quarter we saw a rally that was more reflective of the fundamentals. Perhaps now they may be got a little bit overbought, maybe it’s a little bit ahead of itself. In the last couple of weeks we’ve seen it kind of slow down. Our bullishness, if there is one is about the pipeline of proprietary opportunities that are available even at prices that were discovery prices back in August or July. The euphoric rise over the last couple of months maybe a little ahead of itself, that’s our view.

When I see those evaluations have moved up and you sound like you're a little more optimistic, it’s kind of an unusual stance.

We had a portfolio that we believe was undervalued in the marketplace and certainly the marketplace now because pricing has embraced the valuations and we have a thorough process and we feel very comfortable about our current opportunity set. What we are saying as a company is, you need to go through that process to have a primary market come back. The primary market's poised to come back. When secondary opportunities are priced in the 50, 60, 70s and 80s you can’t do a primary issuance. So you needed the bank loan market to adjust and reprice which it now has. You needed the high-yield market to rally which it now has. Now potential financings can take precedent because they can go to a bank, the bank will feel comfortable about underwriting a bank deal. What we're excited about is we're not levered, we have capital and this is the time to invest as well at the same time harvesting things in our portfolio that have risen to a level that don’t make sense anymore. So, this is continuing a business of investing and harvesting. I keep going back to the same point. You can do that when you're not very levered and you can do that when you are not over your skis in paying out more and the dividend than you earn every quarter. We have the right balance of leverage, the right balance with income versus our dividend and the backdrop is the market opportunity. That's the overall theme which you should take away for all of the questions.

This concludes the Q&A portion of today’s conference. I would now like to turn the conference over to Jim Zelter for closing remarks.

On behalf of the management team we want to thank everybody for attending today. We take a lot of time to prepare for these. We get a great participation from the analysts and our shareholders. We appreciate the time and look forward to speaking to you next quarter. Thank you very much.

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