MidCap Financial Investment Corporation (MFIC) Q1 2018 Earnings Report, Transcript and Summary

Good morning and welcome to Apollo Investment Corporation's Earnings Conference Call for the period ended June 30, 2017. At this time, all participants have been placed in listen-only mode. The call will be opened for a question-and-answer session following the speaker's prepared remarks. [Operator Instructions] I will now turn the call over to Elizabeth Besen, Investor Relations Manager for Apollo Investment Corporation.

Thank you, operator and thank you everyone for joining us today. Speaking on today's call are Jim Zelter, Chief Executive Officer; Howard Widra, President; Tanner Powell, Chief Investment Officer; and Greg Hunt, Chief Financial Officer. I'd like to advise 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'd 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. Forward-looking statements involve risks and uncertainties, including, but not limited to, statements as to our future results, our business prospects and the prospects of our portfolio companies. You should refer to our registration statement and shareholder reports for risks that apply to our business and that may adversely affect any forward-looking statements we make. We do not undertake to update our forward-looking statements or projections unless required by law. To obtain copies of our SEC filings, please visit our website at www.apolloic.com. I'd also like to remind everyone that we posted a supplemental financial information package on our webpage, which contains information about the portfolio as well as the company's financial performance. At this time, I'd like to turn the call over to Jim Zelter.

Thank you, Regina. Good morning, everyone, and thank you for joining us for our quarterly earnings call this morning. I'll begin today's call by briefly discussing the market environment, followed by an overview of our results including a quick update on the progress we have made executing on our strategy, as well some additional business highlights. I'll then turn the call over to Howard, who will discuss our progress in greater detail. Tanner will then cover our investment activity for the period and provide an update on credit quality of the portfolio. And finally, Greg will review our financial results in greater detail. We will then as usual open the call to questions. Beginning with the market backdrop, market conditions remain competitive due to strong demand for loans driven by CLO issuance, loan mutual fund inflows and middle market loan fund raising. As a result of these elevated conditions, new issued yields have declined. The scale drafted Apollo's direct origination platform continues to provide us with attractive opportunities and allows us to be selective, adhere to our underwriting standards and support the needs of our borrowers even in today's environments. Moving to our strategy, we are pleased to report that we continue to successfully execute the repositioning strategy that we outlined last year as we continue to reduce our exposure to non-core and legacy assets and deploy capital into our core strategies. At the same time, we have continued to improve the risk profile of our current portfolio by increasing our exposure to first lien and floating rate loans, and decreasing our average borrower exposure. Moving on, we have an active origination quarter where we invested $342 million during the quarter. Repayment activity was elevated and net investment activity was a positive $90 million. Net leverage as of the end of the quarter was 0.62 times. And given current market conditions, we believe it is important to maintain dry powder to deploy when conditions - as investors improve. Net investment income for the quarter was $0.15 per share and net asset value declined slightly to $6.73 per share as the net unrealized loss on our oil and gas investments due to commodity prices was mostly offset by gains in other parts of our broad portfolio. Regarding distribution, the Board approved a $0.15 distribution to shareholders of record as of September 21, 2017. In addition, the company held annual meeting of stockholders yesterday. After that meeting the company's stockholders' approval proposals and we greatly appreciate the support of our shareholders. Looking ahead, we will continue to focus on executing our strategy, which we believe will yield stable and predictable returns for our shareholders. I will now turn the call over to Howard.

Thanks, Jim. As mentioned, we continue to successfully execute the portfolio repositioning strategy that we outlined last year. As a reminder, our strategy emphasizes senior secured traditional corporate loans sourced by Apollo's direct origination platform with a focus on first lien and floating rate with additional exposure in first lien loans and life sciences, asset based lending and lender finance. We refer to these assets as our core assets or strategies. Our strategy also includes reducing exposure to non-core assets or strategies which include oil and gas, renewables, structured credit and shipping. Our target portfolio is approximately 50% to 60% in traditional corporate loans; approximately 20% to 25% across life sciences, asset based lending and lender finance; approximately 15% percent in aircraft leasing with the balance in any remaining non-core strategies. I will now discuss our progress in greater detail. First, we continue to deploy capital into our core strategies, including investments made pursuant to the co-investment order. Since commencing our repositioning strategy a year ago, we have invested approximately $747 million into our core strategies, including $294 million into co-investment transactions. Core strategies now account for 74% of the portfolio compared to 59% a year ago. Second, we continue to reduce our exposures to non-core and legacy assets, which now account for 26% of the portfolio at fair value compared to 41% a year ago. In aggregate, non-core and legacy assets have decreased by $434 million over this period and now total $631 million at fair value. Oil and gas exposure has declined to 6.6% of the portfolio at fair value, structured credit to 3.6%, renewables to 7.6% and legacy and other exposure has declined to 3.5%. These are all down significantly from when we commenced our repositioning strategy. We call these non-core assets are higher on their respects and have more volatile returns. In addition, we also made progress repositioning non-earning assets. During the period squared to one of our non-earning legacy investments was repaid above our mark, which allowed us to deploy more capital into our core strategies and grow our earning assets. As mentioned on last quarter's call, it is our desire to exit Solarplicity given its size and inherent volatility. Solarplicity is currently generating positive net cash flow. While reducing our exposure to non-core assets is the top priority, we continuously evaluate the cost of exiting such investments against our downside risk. Third, we are continuing to make steady progress to improve the overall risk profile of our portfolio by increasing our exposure to first lien and floating rate loans and decreasing our average borrower exposure. As of the end of June, first lien debt had increased to 47% of the total portfolio at fair value, the floating rate portion of our corporate debt portfolio had increased to 86% at fair value, and our average borrower exposure is under $30 million. Looking ahead, we will continue to focus on investment opportunities which are directly originated from the Apollo platform as we seek to build a high qualified diversified floating rate senior loan portfolio. We also continue to actively pursue co-investment opportunities, our ability to co-invest alongside other Apollo affiliated funds and entities has greatly enhanced our ability to participate in larger commitments and be a one-stop solution provider to our clients, which is a key differentiating factor in today's competitive environment. This is evidenced by the fact that over 36% of our deployment over the past four quarters has been in transactions made pursuant to our co-investment order. We look forward to reporting our continued progress executing on our strategy over the coming quarters. With that, I will now turn the call over to Tanner who will discuss investment activity and credit quality.

Thank you, Howard. As Jim mentioned, the loan market continues to be competitive. In general, we are seeing pressure on investment yields in terms and we've passed on many deals, which do not provide adequate risk-adjusted returns. However, we are finding select opportunities to meet our criteria as we benefit from being part of a large direct origination platform with access to proprietary opportunities. During the quarter, we invested in $342 million. We invested $342 million in 11 new portfolio companies and 11 existing companies with a focus on floating rate debt and our core strategies. Given the continued strength in credit markets, repayment activity was elevated during the period. Exits totaled $252 million, which consisted of $242 million of repayments and $10 million of sales. Net investment activity before repayments was $332 million and net investment activity after repayments was $90 million for the quarter. The weighted average yield on investments made during the quarter was 10.3% and the weighted average yield on sales and repayments was 11.3%. I will now discuss our deployment for the period in great detail. During the quarter, we deployed $143 million or 40% of our deployments across seven companies made pursuant to the co-investment order. We invested $37 million in one asset-based transaction, $24 million in three life sciences investments and $82 million across three corporate lending transactions. Turning to aircraft leasing, which continues to be one of our larger industry concentrations, we continue to be pleased with our investment in Merx Aviation as the underlying portfolio continues to perform well. As of the end of June, our investment in Merx was $463 million, representing 19.2% of the total portfolio at fair value. Merx continues to see attractive opportunity to add to its portfolio with high quality aircraft and lessees, as well as opportunities to monetize select aircraft in its portfolio. During the period, we deployed approximately $105 million in the Merx and we repaid $66 million resulting in net investment of $40 million. Merx also paid a $3.6 million dividend for the quarter. The balance of our investment activity was mostly spread across several secured debt floating rate corporate loans within our core strategies. In addition to the repayment from Merx, repayment included in our investment in crafts CLO 2013, ECN Holding Company, Sterling Holdings and our investment in SquareTwo. I will now give a brief update on our energy portfolio. At the end of June, oil and gas represented 6.6% of our portfolio at fair value or $159 million across three companies. During the quarter, we funded $2.5 million into Glacier Oil & Gas and $9 million in the Spotted Hawk. We continue to work closely with both management team and we may deploy some additional capital on to these names during the coming quarter to support accretive development projects. The values of these investments were negatively impacted consistent with the decrease in commodity price environment. Lastly our debt investment in Pelican Energy was converted into equity at approximately the same price. Now, let me spend a few seconds discussing credit quality and our overall portfolio. At the end of June, investments on nonaccrual status represented 1.1% of the portfolio at fair value and 1.9% at cost down from 3% and 7% respectively at the end of March. Nonaccruals decreased due to the exit of SquareTwo and the write-off of a few other legacy investments. The current weighted average net leverage of our investments remained 5.5 times. The current weighted average interest coverage improved to 2.7 times. With that, I'll now turn the call over to Greg who will discuss the financial performance for the quarter.

Thanks, Tanner. The total investment income for the quarter was $66.7 million, up slightly quarter-over-quarter. Recurring interest income increased quarter-over-quarter due to an increase in our income generating assets offset by lower fee in prepayment income. Dividend income, which is primarily derived from our aviation and shipping investments, as well as our remaining CLO positions was $5.9 million for the quarter, down from $6.1 million last quarter. Merx increased its dividend to $3.6 million from $2.7 million last quarter as the aircraft sales have accreted to higher earnings. Fee and prepayment income combined were $3.8 million in the June quarter compared to $6 million in the March quarter. The March quarter included higher fee income relating to amendments, as well as higher prepayment income as a result of the elevated level of prepayments during this quarter. Expenses for the June quarter totaled $33.4 million compared to $29 million in the March quarter. Excluding the prior quarter's incentive fee reversal, expenses were slightly down quarter-over-quarter as a result of lower management and administrative expenses. The incentive fee rate for the quarter was 15%. Net investment income was $33.3 million or $0.15 per share for the quarter. This compares to $37.3 million or $0.17 per share for the March quarter. For the quarter, the net loss on the portfolio totaled $4.5 million compared to a net loss of $29.2 million for the March quarter. Negative contributors to the performance for the quarter were primarily isolating to our energy investments in Spotted Hawk and Glacier as commodity prices declined quarter-over-quarter. On the positive side, our investments in asset, repackaging trucks, and renew financial saw improved valuations quarter-over-quarter. Lastly, during the quarter, we exited and wrote off several legacy positions, which resulted in the realization of previously recorded security write-downs. And therefore, there was not any impact on our NAV. In total, our quarterly operating results increased net assets by $28.8 million or $0.13 per share compared to an increase of $8.1 million or $0.04 per share for the March quarter. Net asset value per share was $6.73 per share at the end of the quarter. Turning to portfolio composition, our portfolio had a fair value of $2.4 million and consisted of 84 companies across 23 industries. First lien debt represented 47% of the portfolio. Secondly, debts represented 30%. Unsecured debt represented 7%. Structured products represented 6%. Preferred income and equity positions represented 10%. The weighted average yields on our debt portfolio at cost was 10.3% unchanged quarter-over-quarter. On the liability side of the balance sheet, we had $921 million of debt outstanding at the end of the quarter. Included within our debt are $150 million of daily bonds with a coupon of six in five days, which become callable in October. It is our intention to redeem these bonds using our credit facility, which has a lower funding cost. Our leverage ratio, which includes the impact of cash and unsettled transactions stood at 0.62 times at the end of the June, up from 0.55 times at the end of March. Given where our stock has been trading, we do not repurchase any shares during the quarter. Lastly, we continue to be well positioned for future interest rate increases, as 86% of our corporate debt portfolio is floating rate. Given our investment portfolio and mix of liabilities we expect meaningful benefit from an increase in short-term rates going forward. This concludes our remarks. Operator, please open up the call for questions.

Good morning and thank you for taking my questions. Tanner and Howard, I wanted to start with more of a global kind of view as it relates to sharing investments across the Apollo platform, which is a very unique and obviously good thing given your performance on behalf of your institutional investors. Can you walk us through - we look at some of the names like CT, Merx will leave aside for a moment or Ericsson or certainly Westinghouse, which ones - which of those loans have significant amount of ownership by other Apollo funds that are not attributed to the BDC, just to get a sense of who you are sharing with on platform and how.

Yeah, sure Jonathan thanks for the question. And as you would appreciate, depending on the type of transaction and the yield, it will find overlap with different types upon each of those names that you enumerated. We are actually shared with a broader platform and then in certain other cases, the investments were not necessarily the same, again, owing to the character of the loan and the yield of each of those names that you mentioned.

Okay.

I mean you can draw some conclusions on sides. Westinghouse was a really big loan. It's sort of power packed, so you could say a wide variety in almost every eligible institutional account or strategy that could put - that would participate in something like that did. Ericsson was - it's an asset-based loan revolver. That's a core mid-cap loan.

Okay.

That's a deal with mid-cap. That's right down the middle of the asset-based loans we are trying to do. There are a few other accounts that also play along in that given the size of it, but that's more just right in the middle of the mid-cap strategy.

Okay. And then taking a moment, I know you are continuing the portfolio repositioning process and selling out some old loans and realizing those losses et cetera. Even in this current environment, what we are finding is some loans that can't prepay, will and have, in some cases, because they are able to get spread protection elsewhere, lower spreads elsewhere. Can you walk us through the amount of call or embedded earnings potential that you see on loans that are potentially on deck for refinancing? And so, it's not - it is much of a forecast of what is the dollars and cents' impact as it is of the repayments that you would see coming through the pipe given this tighter spread environment. How many of those loans are older legacy investments with little call or embedded OID and how many of those loans have perhaps then originated near-term that might provide a boost to 12-month estimate?

Sure. The legacy investments, the stuff that we sort of classified legacy investments, first of all, a lot of those sort of are in the equity bucket, right, because that's sort of the structure, which is lagging more volatile. So, they inherently don't have call protection. They may have NAV upside or downside that - hence the volatility. And our exits thus far had been pretty good versus where they have been in March, which is why there actually hasn't been that much NAV movement with its significant repositioning over the last four quarters. So, we sort of did that at March list [ph]. So, let's put that stuff aside. So, our refinancings, as a result, are sort of generally in stuff that is more recent footage [ph] And so, our call protections on those loans are sort of commensurate with what you are seeing with some of our competitors in terms of percentage. And so, we do see some uplift from that, which in our mind put aside how your view or your peers are modeling, from our perspective, it's a good litigant to stains what we under levered given where the market is, right. But, yes, it provides a tailwind to earnings. So, we do see that and see it in real time.

So, then I understand one deal is not indicative of the entire investment pool you've made, but so let's take for example second lien loans for a second. The loans that are - this is a fairly competitive point in the credit markets and there are a number of folks that are competing for a lot of second lien transactions that are either trying to grow into scale. They can do that faster for a number of reasons. And this category has seen significant spread depression. And so, if we look at a name like Securus, here was a Deutsche Bank-led loan, covenant, CCC, kind of a thing. Walk us through that investment and why you made it and whether or not it is effectively a tale of some of the other second lien deals that you decided to put in the portfolio. Because it's the only one that we can probably easily see, but also just every deal is different and we understand, we would probably just appreciate more color on that so that we don't paint the entire second lien basket as arguably higher risk with substantial downside given the competition for that type of yield of the asset.

Yeah, sure. And, Jonathan, this is what your question that you've asked in previous quarters. And if you look across the $342 million that we originated, certainly there were the names that were definitively within ABL and life sciences, but they're with a healthy number of originated transactions. And I pointed to things like CT, [indiscernible], as well as SmartBear and Health Sciences in that regard and then also - in one of the comments we've made in the past from time to time particularly in markets such as this, knowledge of issuer such as Securus among others across the broader platform gives us opportunities to create that risk at what we think is at attractive levels. We typically keep these types of investments and very low exposure. And so, in the case of Securus, only $12 million and there is various others. At sometimes, I'm just trying to give you a little bit more color and not to hog the mic here. There are also incentives as you would imagine in this market whereby we are doing private type - deep type diligence or have historical knowledge of the particular credit. There might have been a private debt type opportunity historically, but then knowing just how healthy the syndicated markets are that particular deal goes syndicated and given our comfort with that issuer, we may choose particularly in markets such as this to participate in those syndicated transactions on a limited basis and we think of that as a nice offset in a small part of our origination activities particularly in markets such as this.

So, let me just put a - let me just put a little numbers on it, right, like Securus, as Tanner said, we can sort of originate the stuff at a little better levels than sort of a rebuild because it's sort of the power, the buying power and so that makes sense. And we also feel a need for our own sake and for guidance from bank and other industries to have a certain amount of our portfolio being liquidized and so sort of dwells out of that. So, I would not - I would describe it as not a tell at all, I would describe it as sort of a 10% to 15% part of our corporate portfolio that we can take advantage of some buying power we have and keep some liquidity and it's certainly unrelated to our other stuff.

I appreciate it. I wasn't really going down the path of direct versus indirect origination, just for the competition in the second lien category, just it has been pretty serious based on a couple of competitors really wanting those assets, so it was a good - it's a good description on how you are looking at the space. That's all from me. Thank you so much.

Your next question comes from the line of Terry Ma of Barclays.

Hey, good morning. Can you help us think about or how should we think about the Merx dividend going forward? I think you guys mentioned that was elevated Q-over-Q just from higher sales.

Yeah, I think when - as we've said before, our dividend capacity in Merx is probably between $2.5 million and $3.5 million, but it does fluctuate depending upon if we are selling aircraft and their gains on those aircrafts. So, it can fluctuate, but I would - from a modeling point of view that's where I would estimate it.

Okay, got it. And I think most of their aircraft that have actually reported so far and have reported pretty large gains this quarter and I think closing, since it's actually a pretty strong market to sell into, which at the same time means it would be a competitive market to buy. So, can you maybe just give some color on where you are seeing opportunities to grow Merx? You guys deployed over $100 million into Merx this quarter.

Yeah, sure. So, when we think of our strategy in some ways complimentary to the broader, the bigger lessors that you might be more familiar with. And owing to our platform, owing to our origination capabilities there, having a number of interesting opportunities that present themselves, I think in this particular quarter we happened to have one transaction that we thought was very interesting. And as we mentioned in the prepared remarks, actually it was something that on average with a higher quality portfolio versus the rest of Merx and importantly due to financing markets enabled us to create that transaction at an attractive level and then counterbalanced as evidenced by the number of repayments and we see more repayments on the future enable us to credit risk manage certain to other either careers and/or aircraft types that are less interested. And so, we look at this as an opportunity that speaks to our origination platform and the ability to credit risk manage around the edges to create a better a higher quality portfolio.

Got it, is Merx namely buying from other or lessors or airlines and also can you remind me what the average age of that portfolio is just Merx overall actually?

Yeah , sure, sure. It's a very good question and we benefit from deal flows from a number - of different places. One of the biggest generators of flow historically has been from other lessors, certain of the bigger guys are almost exclusively focused on the new issue market. We have done some original sale lease backs but predominately we are playing in midlife aircraft and some actively later life aircraft or average age of our portfolio is roughly seven years which kind of speaks to that focused on mid-life and sometimes to comment on the complimentary point is we have - we are better buyer of that mid-life aircraft and it enables us bigger lessors to redeploy capital into their base business taking new deliveries and placing those carriers.

Okay got it. That's it to me. Thanks

Your next question comes from the line of Douglas Mewhirter of Suntrust.

Hi, good morning. First question it's actually kind of a trivial numbers question, but it seemed - in your other income line for a non-controlled, non-affiliated was actually a negative number, I just wondering how does that - what was the nature of that line item?

We set a prior period adjustment and for investor we have.

Okay, thanks and actually staying on the Merx subject, so obviously Merx has done very well for you. It's a very high effective yield and appears to be very well managed and based on the commentary from some of the larger company executives, the market seemed to have picked up particularly in Europe. But I know that you are trying to concentrate on your core portfolio, your life sciences portfolio and you have some pretty big guard wheels around Merx, so how much are you willing to stretch that or is the market going to cooperate and actually you have as much sales opportunities as you do deployment, so you don't have to worry about asset allocation and get up the head of having markets to big even if it is a favorable market. Just how are you sort of thinking about, how Merx in relations to the current market?

Yeah. I think as Howard said earlier, we think about broad portfolio allocation. Merx is probably 20% or so at the top end and I think over a cycle we have found a couple of very interesting opportunities right now. But I think you see that portfolio probably trend down a little bit overtime a percentage of the overall portfolio. We feel very comfortable with it. As you said we got a great fair factor, a very nice diverse of portfolio in secondary leases. So we've thought something plus or minus 15% percent, but again we feel very comfortable right now and again I think some of the bigger companies, public companies are more in the newer aircraft which, to me certainly connected in terms of valuation and into that nature. But we believe what a little bit difference of value proposition than some of the public companies and we still feel that we are finding insisting opportunities today, but you are not going to turn around and see us, we are really thinking about that 20% being a cap that we don't - we do not want to exceed. Now I will tell you, it's going up as a percentage over the last twelve months as the rest of our portfolio to repositioning is round down. So falls into the - it's actually dropped in absolute dollars, but in percentage it's gone from 16 to 17 today because of the overall optimization of the portfolio.

Thanks. And I appreciate that detail. It's very helpful. My last question on oil and gas, oil looks like it's sort of floating with 50 or its - has down shrunk quite a bit. Is that - I know there is really so much you can say about this, but did you have a few legacy oil and gas in E&P companies looks like you have been putting for more capital into there, but does that - I'm sure get unpleasant calls about maybe buying those assets everyone is involving it has the bid come up on the type of land - sit under those real assets to where could be the possibility of an exit that you are happy with in one or all of them over the balance of this year, if oil sales were that.

Yeah. Hey, Doug. There are a couple of things there. First I think you're alluding to how oil has moved around valuation as we talked in the past is due to mediator factors and including as it relates to oil price kind of longer term oil prices as well that are actually more impact of an evaluation stand point. And so numbers can turn it around. With respect to our two platforms that constitute the majority of our exposure today as we alluded to and you alluded to as well, we are very focused on value maximizing activities within those companies and will evaluate our opportunities to monetize kind of consistent with our strategy to reduce our exposure to commodity related investment. So we will - we evaluate those as we come - as they present themselves.

Okay, thanks. That's all my questions.

Your final question comes from the line of Ryan Lynch of KBW.

Good morning and thank you for taking my questions. Couple of questions I have. Just as I kind of think about your guys portfolio transition you guys are making over the past year, it looks like you guys have done a good job, rotating from core strategies the 59% of your portfolio to 74% and then - as well as rotating out of non-core strategies just from 35% to 22% of your portfolio. So as I think about where we are in this portfolio transition process those non-core strategies have significantly been reduced, but is your plan to get that number down to zero or do you plan on still holding a percentage of your portfolio in those non-core strategies and if you do plan holding a percentage of your portfolio in these non-core strategies where does that look to be?

Yeah, so the answer is we are looking to proactively exit the full list of those investments. So we don't expect that to occur. We feel comfortable with our marks on those investments, so want to exit them when they make sense and so I think ultimately some of them won't get excited because we like the way they are yielding more than somebody may pay us for. And some of them are inherently less volatile than others, like the shipping for example is just less volatile than some of the other ones. So the way I think we look at it is about a quarter of what's remaining roughly a little bit less than the quarter what's remaining and we are very focused on exiting that. And exiting that and then being able to sort of mitigate some of the oil and gas maybe exiting one of those two platforms and we would say we'll still track it, but we would pay at that time point it is behind us in terms of the strategy even though we will continue to not add so those protocols and we will continue to lessening the run off or so. So I think we are pretty close to dawn in terms of the amount of transactions to get done, it won't go to zero, but hopefully it will become a rounding error in the model going forward.

Okay, that makes sense. When speaking with [indiscernible] that investment was written off a little bit about 5 million in the quarter. Was that due - does that have anything to do with any sort of currency fluctuations or was there any sort of slight improvement in kind of the outlook for that business?

It's a direct offset to FX, where it was a flat quarter. Yeah.

Okay. All right, thank you, those were all the questions for me.

You can have time for one additional question. That will come from Melissa Wedel of JP Morgan.

Good morning, Melissa Wedel for Rick Shane. I just wanted to get a sense for your comfort level with dividend coverage as you weigh the yield of new investments against a shift from earning assets in a strategy and the potential for a tail wind on LIBOR. Do you think that's enough to offset the real compression at this point?

So, in thinking through sort of our dividend coverage, we have sort - what we have said really for past year is that once the portfolio has repositioned with sort of meaningful yield compression at 0.65 to 0.7 leverage we have and reasonable fee income, we will cover the dividends well. We have some tailwinds, the LIBOR change you mentioned as a pending refinance or something like that we talked about. So we have some tailwind to help support that offset by the headwind of being under levered right now, which suited the market is may cause us to stay there. So the answer is we are comfortable - we're continuing to be comfortable with our core thesis, which is in the medium term and long term at sort of less than market average leverage levels, we will cover the dividend solidly. There could be cross wins if we're continuing to try to stay under levered in one particular quarter, but there has been nothing that has sort of changed that analysis. And in fact I'd say we're more confident of it. And you can see it in where sort of our yield has compressed from a year ago and actually what's happened over the last couple quarters, which is the last couple quarters have been pretty steady a lot of our yield compression has been related to the change in the core rate on Solarplicity. And so we feel pretty good about our ability to generate the assets in that range we talked about at that 0.65 to 0.7 leverage to cover the dividend.

Okay. Thank you.

At this time, I'd like to return the call to Jim Zelter for any additional or closing remarks.

Thank you, operator. On behalf of the team, we thank you for your time today and your continued support. Please feel free to reach out to us if you have any questions and have a great day and we look forward to talking to you next quarter. Thank you.

Thank you for participating in the Apollo Investment Corporation earnings conference call. You may now disconnect.