Operator: Good afternoon and welcome to Apollo Investment Corporation's Earnings Conference Call for the period ended December 31, 2019. At this time, all participants have been placed in a listen-only mode. The call will open for question-and-answer session following the speakers' prepared remarks. [Operator Instructions] I will now turn the call over to Elizabeth Besen, Investor Relations Manager for Apollo Investment Corporation.

Elizabeth Besen: Thank you, operator, and thank you for everyone for joining us today. Speaking on today's call are Howard Widra, Chief Executive Officer; Tanner Powell, President and Chief Investment Officer and Gregory 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 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 website, 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 Howard Widra.

Howard Widra: Thank you, Elizabeth. I'll begin today's call with a review of the progress we've made over the past few years. Followed by an overview of the results for the quarter. Following my remarks Tanner will discuss our investment activity for the quarter and will also provide an update on credit quality. Greg will then review our financial results in greater detail will then open up the call to questions. Over the last several years, we've made significant progress de risking the portfolio and building a well-diversified portfolio of first lien floating rate corporate loans. Our progress is evident by the improving our credit metrics. For example 82% of our corporate lending portfolio is first lean loans compared to 29% in June 2016. Over this period, our weighted average attachment has declined from 2.7 times to 0.9 times. Our portfolio is much more granular, as evidenced by the decline in our average borrower exposure in our corporate lending portfolio from 23.7 million in June 2016 to 16.4 million today. We have also significantly reduced our exposure to noncore and legacy assets which are higher on the risk spectrum and have more volatile returns. At the end of June 2016, noncore and legacy assets totaled $1.65 billion. At the end of December 2019 noncore legacy assets total $358 million at 66% declines. Net proceeds from the sale of repayment and noncore legacy assets total approximately $600 million over this period. We continue to seek to monetize or restructure our remaining noncore assets with the ultimate goal of maximizing value for our shareholders. Additionally, over the last few years and we been able to take advantage of two important regulatory release exemptive relief to co-invest and a reduction our asset coverage requirements. The Apollo director origination platform originates the significant amount of senior floating rate loans, which are available to AINV given exemptive relief and are within our target spread range given our ability to use more leverage. Given our ability to co-invest with the broader Apollo platform, we have been able to participate in large commitments while maintaining relatively small hold sizes on AINV's balance sheet. In addition, AINV was fortunate to be in a unique position to already have all the origination necessary to implement a prudent lower risk portfolio growth strategy when it adopted the reduced asset coverage requirement. Both of this regulatory release has allowed us to build a diversified granular portfolio of first lien floating rate loans. In this regard since April 2018, when we began to invest in lower risk assets following the passage of the small business credit availability act, we have made approximately $2.4 billion of new corporate lending commitments. $1.9 billion of those commitments are currently outstanding, of which approximately $1.5 billion are funded, all of those are performing. Last week, we have implemented a number of shareholder friendly actions which demonstrate our commitment to creating value for our shareholders. In May 2018, we announced changes to our fee structure including any and total return requirement, so our incentive fee calculation. We also permanently lowered our management fee to 1.5% and further reduce the management fee to 1% on assets in excess of one times debt to equity. Second, AINV is been actively repurchasing stock. We believe that stock buybacks are the most accretive use of shareholder capital when the stock is trading at a meaningful discount on that. Our board has authorized $550 million plans for total authorization of $250 million. Today we have repurchased over $208 million of stock below NAV, which has accreted $0.68 to NAV per share. We believe the combination of AINV fee structure changes and active stock repurchase program demonstrate our commitment to creating value for our shareholders. Moving to the December quarter, we continue to successfully implement our plan to prudently grow our portfolio. With a strong origination quarter and grow our portfolio by approximately 6% by increasing our exposure of first lean floating rate corporate loans sourced by the Apollo direct origination platform. During the quarter we also reduce our exposure to second lien loans and our noncore and legacy assets. Second lean sales and repayments totaled $62 million and noncore and legacy asset repayments total $46 million. Given our strong net investment activity, our net leverage ratio increased to 1.43 times at the end of the quarter. As stated on our private conference calls. This leverage level is consistent with our expectation that we will operate between 1.4 and 1.6 times. In addition, this quarter was an important inflection point in the makeup of our noncore portfolio. The noncore portfolio decreased by approximately $67 million to the combinations of repayments in unrealized losses, reducing noncore assets to 12% of the portfolio. In addition, the risk attributable to our remaining noncore portfolio has decreased due to the successful restructuring of our investment in carbon free chemicals during the period. The combination of this restructuring and increase the impact of the reinvestment of the proceeds received from our noncore and legacy repayments have allowed us to have a smaller and better collateralized noncore portfolio while improving the overall earnings profile of Apollo investment. Moving to our financial results, net investment income for the quarter was $0.54 cents per share reflecting the net portfolio of growth and they were total return feature in our incentive fee structure, which resulted in a nominal incentive fee for the quarter. It is important to note that average leverage for the quarter was 1.27 times and client at the larger portfolio will continue to drive earnings growth in the current quarter. Net asset value per share was 18.27 at the end of December down 2.3% quarter over quarter. The $0.42 net reduction in NAV per share was due to a $.54 net loss on the portfolio partially offset by net investment income in excess of the distribution of $0.09, and a $0.02 accretive impact from share repurchases. Noncore and legacy assets accounted for $.51 or 95% of the net loss, oil and gas accounted for $0.19 of loss, legacy assets for $0.18, renewable $0.13 and shipping $0.01. Turning to our distribution the board has approved a $0.45 cent per share distribution to shareholders of record as a March 20, 2020. With that I'll turn the call over to Tanner for investment activity for the quarter.

Tanner Powell: Thank you, Howard. The environment for middle market lenders remains highly competitive given the significant amount of capital raise for U.S middle market lending. As Howard mentioned, during the quarter, our investment activity focused on first lien floating rate corporate loans sourced by the Apollo direct origination platform. New investment commitments and funding were $491 million and $399 million respectively. New debt commitments were all first lien floating rate loans. These new commitments were across 28 companies for an average commitment size of $17.6 million. The weighted average spreads over the LIBOR of these new commitments were 612 basis points within our target range of 500 to 700 basis points for incremental assets. The weighted average net leverage for new commitments was 5.3 times within our range of 4 to 5.5 times. Lastly, 85% of these new commitments were made pursuant to our co-investment order. Sales totaled $15 million and repayments totaled $212 million for total exits of $227 million resulting in net funded investment activity of $172 million excluding marks and revolver activity. During the quarter we reduced our exposure to second lien loans and noncore and legacy assets. Second lien sales and repayments total of $62 million including, PSI, [indiscernible] intermediate. Noncore legacy asset repayments total $46 million, including $34 million from asset repackaging, a legacy asset $5 million from glacier, one of our oil and gas investments and $6 million from two of our renewable assets. In addition, net funding and revolvers were $1 million, we also received a net repayment of $2 million from Merck's. Net funding, totaled $171 million, including Merck's and revolver activity. Now, let me spend a few minutes discussing overall credit quality. No investments were placed on or removed from nonaccrual status. At the end of December investments on nonaccrual status represented 0.7% of the portfolio fair value down from 1% last quarter and 2% at cost down from 2.1% last quarter. Moving on to our credit metrics, the weighted average assets spread on the corporate lending portfolio decreased 16 basis points to 651 down from 667 last quarter when compared to 612 basis points for new commitments. The lower average spread is due to the decrease in second lien exposure and the increase in first lean exposure. The weighted average net leverage of our investments decreased from 5.5 times to 5.27 times and compared to 5.3 times for new commitments. And the weighted average attachment point of the portfolio declined from 1.3 times to 0.9 times. The average interest coverage improved remain at 2.5 times. As we said in the past, we view this trade off of the yield for credit quality as a positive at this point in the credit cycle. With that I will now turn the call over to Greg who will discuss the financial performance for the quarter.

Greg Hunt: Thank you, Tanner. Beginning with the income statement total investment income was $68.5 million for the December quarter and $1.8 million or 2.6% from the prior quarter. The decrease was attributed attributable to lower recurring interest income and fee income partially offset by higher prepayment and dividend income. Despite positive net investment activity, recurring interest income declined due to the decline in LIBOR and lower spread on new investments compared to investments sold or repaid and the cadence of activity during the quarter. Fee income was $1.2 million down from $2.2 million last quarter, prepayment income was $2.8 million up from $2.1 million last quarter and dividend income was $3.2 million, up slightly from $2.8 million last quarter. Expenses for the quarter were $32.3 million down $2.3 million or 6.7% quarter over quarter, primarily due to a significant lower incentive fee and lower interest expense. Recall, the incentive fee was revised to include a total return requirement with a rolling 12 quarter look back beginning from April 1, 2018 and was put into effect on January 1, 2019. Interest expense declined slightly due to a decline in the weighted average funding costs given the redemption of the baby bonds in the prior quarter and the increased utilization of the credit facility which benefited from the decline in LIBOR partially offset by higher average debt balance given the portfolios growth. The quarterly weighted average interest costs declined 39 basis points from 4.59% to 4.2%. The average quarterly debt outstanding balance increased by approximately $90 million from $1.5 billion to $1.58 billion. Net investment income was $.54 per share for the quarter compared to $0.53 per share for this September quarter. Net leverage at the end of December was 1.43 times compared to 1.24 times at the end of September. Average leverage during the quarter was 1.27 times up from an average of 1.13 times during the September quarter. The net loss in the portfolio for the quarter total $35.9 million or $0.54 per share. Approximately $34 million or 59% of the net loss was attributable to our noncore and legacy assets, including our investments in carbon free glacier, solar publicity, and Spotted Hawk. Net asset value per share was $18.27 at the end of December compared to $18.69 at the end of September. Turning towards the portfolio's composition. Our total assets had a fair value of $3 billion at the end of December and consisted of 151 companies across 27 Industries. We ended the quarter with core assets representing 88% of the portfolio up from 85% at the end of September and compared to 80% a year ago. Noncore assets decrease to 12% of the portfolio down from 15% at the end of September and 20% a year ago. First lien assets increased to 82% of the corporate lending portfolio up from 77% last quarter and up from 62% a year ago. The weighted average attachment point improved to 0.9 times down from 1.3 times last quarter. Investment made pursuant to our co-investment order increased to 76% of the corporate lending portfolio at the end of the quarter, up from 74% last quarter, and 59% a year ago. The average corporate lending portfolio yield for the quarter was 9%, down 40 basis points quarter over quarter. That decline was due to the combination of a decrease in LIBOR and a reduction in the weighted average spread at the portfolio which decreases 16 basis points from 667 to 651, primarily due to our increased exposure to first lean and reduced exposure to secondly lean investment. On the liability side of our balance sheet, we had $1.79 billion of debt outstanding at the end of the quarter. We continue to evaluate alternative sources of capital with a particular emphasis on diversifying our funding sources. As you may have seen last week fixed lowered agency's credit rating from triple B minus to BB plus stable. While we're disappointed by switches actions, we believe that we have built a high quality senior loan portfolio which more and offset our increase use of leverage. Middle market CLO with loans identical credit quality often are rated higher. We believe the improve risk profile of our portfolio will result in earnings stability, which is in the best interest of our stakeholders. Lastly, regarding stock buybacks during the quarter, we repurchased 502,000 shares at an average price of $15.65 cents, for a total cost of $7.8 million. Given the recent rally in the stock, no shares have been purchased since early November. This concludes our prepared remarks and operator please open the call to questions.

Operator: [Operator Instructions] We'll take our first question from the line of Kenneth Lee with RBC Capital Markets.

KennethLee: Hi, thanks for taking my question. Just one on the asset sales looks as if you got some sales within the legacy and noncore side of the portfolio, wondering what you're expectations are right now for any further sales within that portfolio in the near term?

TannerPowell: So, its sales and repayments, right? So there was one, you know, meaningful sale and then of around $30 million and the remainder was repayments on, you know, some of the existing assets. And so we expect to continue to have sort of repayments on -- because we're focused on sort of liquidity on all these and getting a return of capital. So, obviously, wholesale excess of any of those assets are sort of binary, but if you look at glacier for example, we receive $5 million during the quarter and each of the last three, four, five quarters, I don't know exactly we have received capital and we will receive capital this quarter as well. So we would expect to have two sources of liquidity in that portfolio, which is one continue to receive capital to pay down the exposure and then continue to work towards significant restructuring or access, which can happen sort of, effectively, anecdotally.

KennethLee: Okay, very helpful. And just one follow-up if that if I may. In terms of the portfolio positioning, you talked about the first lean as a percentage of portfolio increasing this quarter. And that just being consistent with the overall macro outlook, do you expect this trend to continue over the next few quarters in terms of the positioning? Just want to get your thoughts on that? Thanks.

TannerPowell: Yes, I mean, that's where we're focused. I mean, we at our current leverage level and the makeup of our portfolio, you know, we believe we have good earnings power consistent with where we've got, we've guided and one of the key legs of the stool, if you will of that is predictable credit quality. And so the way we deliver that is by staying high up in the capital structure.

KennethLee: Great, thank you very much.

Operator: Our next question is from Rick Shane with JP Morgan.

RickShane: Hey, guys, thanks for taking my questions. So, when we look at the nonaccruals there's been sort of a steady, write down a fair value there over the last three quarters. Their continued deterioration, are you just taking a more conservative approach? What do you seen as we look at that those four investments?

GregHunt: Well, it's almost all Spotted Hawk. And it's almost all driven by commodity prices. So not a fundamental company change other than the fact, the cost of the commodity. It's not exclusively that performance [ph] all that.

RickShane: Great, thanks Greg, the other issue, I think they're two divergent trends here. One is that the operating EPS, the NII at this point is steadily covering the dividends, you guys have done a good job moving in the right direction there and taking advantage of the higher leverage at the same time NAV continues to decline. How do you reconcile those two trends and how do you ultimately reverse the NAV issue?

TannerPowell: So, on the one side, obviously we're focused on having the capital that we have available to be at work and generating revenue to be sufficient to coverage dividends. So, as you noted, you know, we're sort of there with a portfolio then we have this noncore portfolio, which has a lot of assets like Spotted Hawk or portions non earnings or the renewable which are an equity which are not generating you know a cash return. So on average that portfolio is producing somewhere in the 6% or 7%, 5.6%. So depending on the dividends that are paid off the shifts in a given quarter and so, our focus is sort of twofold is maximizing the return on those assets in order to ensure that NAV, doesn't decline all that much, but at the same time, focus on getting that capital back because it can be reinvest that sort of double the return. So put another way. If you look at as I mentioned in my comments, we received $600 million off over the last 2.5 years on a 1 billion portfolio. So there's been like $100 million of write down roughly while we've received $600 million of proceeds. If you took that same percentage on the portfolio, I'm not at all predicting that you know that the hope and expectations recovered all but if we got 85% of our cash back tomorrow, you would have another reduction in NAV of $40 to $50 million, and you'd have a significant increase in earnings. And so, you know, because we put that to work at 9% and in sort of in the normal course, and so we'd rather not have those two countervailing trends, but we feel like that where the losses in NAV are occurring, one they been driven a lot by commodity prices, and so they can change, we'd rather not have that risk, they can change, but two they have been, that reduction in NAV has been joined by a return of a lot of the capital and then noncore which then has been put to work which has then been able to drive in NII. So you know, obviously as that noncore portfolio goes down, you know, that the level of possible right off goes down. And so we're focused on that. So everybody can have total clarity. But we feel like at the point where we're covering our dividend, it's now mostly economic upside to the shareholder. Even if net -- meaning we'll be able to pay the dividend dollar at a share consistently and cover even beyond. Even if we continue to realize more volatility today, the commodity prices in these assets.

RickShane: Got it. Okay. Last question, look, you guys are approaching your leverage targets and that in a continued strong market will prove to be a good deployment of capital. The flip side is if we were to see dislocation like we saw back in 2012, where there's some pressure in terms of NAV and that causes the leverage ratio to go off and you guys are unable to sort of lean into a more opportunistic market, how do you feel about that trade-off given where you are right now in terms of leverage?

GregHunt: We feel like first and foremost, in order to sort of change the narrative for our business was to have a stable predictable earnings stream, which we feel like we have in these assets and they're quality assets, sort of set up from a portfolio structures perspective to perform well for the cycle. If the market changes and there's more opportunities to deploy capital, we feel like the combination of normal course repayments and our ability to effectively cherry-pick those opportunities off the platform, which is going to be good. Because the capital is there on the Apollo platform and so given our ability to just have some capital be generating as well as sort of sell some assets to have it still remain liquid on our balance sheet we'll have the ability to on the margins take advantage of that opportunity. But of course, not as much as if you would if you have 5 to 1 but enough that we will be able to benefit from it.

RickShane: Great, Greg. Thank you very much.

Operator: Our next question is from Casey Alexander with Compass Point.

CaseyAlexander: Good afternoon. A couple of questions. One, in relation to the debt side the liability side of the balance sheet, you're upwards of 75%, 80% covered by the facility. What vehicles do you think you have available to you especially in light of the Fitch downgrade to diversify the liability side of the balance sheet?

GregHunt: Casey, we still have investment-grade grading from crawl. We feel very comfortable that we can either attack the debt market and or the convert market at rates that are acceptable to us as we look at where our portfolio growth is going to come from.

CaseyAlexander: Okay, thank you. If I calculate adjusted NII for the quarter, I come up with $0.43 a share. Looking at where LIBO is going forward, even with the expansion as a balance sheet, it seems to me that you guys, you really need everything to go right to cover the dividend and comfortably cover the dividend. Frankly, not very many first-lien senior secured loan funds have a dividend on now that is in excess of 10%. Wouldn't it offer investors a better total return if you were to adjust the dividend to a level where you were beating the dividend consistently and building NAV over time? Wouldn't that frankly make more sense?

GregHunt: I think no. You're adjusted number is probably a little bit low. I think it's a little bit low, but call it in the $0.43 to $0.45 range. Our average leverage for the quarter was lower than where we're at right now. So that drives another $0.03 or so cents to our NII. As our portfolio grows, like our recognition of fees, also it will tend to expand. I wouldn't say we're just creaking over it. So I think -- our view is that the expectation of the shareholders is for us to deliver the return that we promised over the past 2.5 years and we feel like we can do that. We also feel like though, fully employed at this level -- right now LIBO has almost hit the worst possible point for us because it goes down much more, our floors kick in, it goes up, we make more money. So despite LIBO being at that level we've gotten to a point where we can cover the dividend. And when you say everything has to go, right, if we keep our leverage levels there we will cover it. Sending the question how do we grow NAV in some other ways, and there are some other ways with some capital gains with tag along equity investments. We're dealing with the value we're driving it max with even with some of those things. I don't think that we think it would be necessary to change the dividend. And we think of all the times since I started being associated with AINV when the dividend was caught to this level, this is the point where we've been most secure and covering it.

CaseyAlexander: Okay, thank you for taking my questions. I appreciate it.

Operator: Our next question is from Chris York with JMP Securities.

ChrisYork: Good afternoon guys, and thanks for taking my questions. So Howard maybe even Greg, I know your portfolio companies are now hedging commodity risk but what effect has the decline in the spot year-to-date for crude had on your portfolio? Maybe even specifically spotted Hawk today? And then secondly, if oil stays at this spot rate are any of your portfolio companies in a precarious spot to cover that service or require an equity injection?

GregHunt: The spot price doesn't drive the valuation. The longer-term curve drives the valuation. So the movement in the prices don't directly correlate to the valuation as of the snapshot of that day. That said, the long term projection of prices today is different, not lower in all respects but lower in most respects than it was a month ago. And so the valuation of the two oil deals that are currently on the book would be down some. In the short term, given that they've been generating cash and paying down debt, at least in the case of inflation Spotted Hawk has been sort of the most part stable from a cash flow perspective, and they have some hedges in place. We don't expect there to be meaningful cash needs. Obviously, could affect their ability to pay down debt but in the short term, we don't. There's no question though. If oil sat -- it's 50 now before it sat at 40 for an extended period of time, that would create some issues, but not where it is today in the medium term. Is that a strong answer?

ChrisYork: Yes. I looked at the forward curve, and yes, it's moved down a little bit, too, with the spot here. And so I'm just trying to think of if…

GregHunt: I don't want to give the exact number. We have a number based on last week, but -- like, last Friday, when we asked the same question you just asked. The thing is brunt [ph] is relevant for one company, WTI is relevant for another one. Those curves look differently. The prices on the curve are actually up in 2023 and 2024, which impacts some of our expected stuff coming out of the ground and our valuation All of which is to say the quarterly valuation of these compensates on those long term curves are a little bit frustrating because they don't necessarily speak to what the value will ultimately be when we get to that period of time. That said, if oil is sitting at 60, it's better for the companies that are sitting at 50. And so you tend to see the geography move in that direction. So given the sort of the drastic moves in oil over the past month, you would expect more of that this quarter if it didn't change, but just like when it goes up, it doesn't drastically go up. It wouldn't be as drastically down as well. Like it's from 60 to 56 18% decline. It's not something like that in terms of value.

ChrisYork: That's helpful. Just trying to understand the pain points there at a price level for potentially Spotted Hawk. Maybe you talked about the short term, so if it was at $55, $50 for the next 12, 18 months, what pain points that would cause? I'll just move on. Secondly, Casey asked this a little bit. It was on your capital structure. Obviously 80% of your debt capital is tied to your bank revolving credit facility. And then you did mention the downgrade below IG. You do have Kroll investment, Greg, but how should investors think about the sustainability of just that one stream? And then the potential diversify, you talked about on balance sheet securitization, which would be a good form of debt capital, but what do you think is the sustainable cost of your debt capital at full leverage?

GregHunt: Well, I think as we said, we're at 4.2. That may, if we did a bond offering or convert that would go up slightly given the size of an offering that we might do but I don't think it'll be meaningful. Maybe you're closer to 4.4, 4.5. It's still a very favorable cost of capital in the marketplace.

ChrisYork: Got it. And then I would have to review the covenants. But is there any pricing adjustments in your bank credit facility on the downgrade there?

GregHunt: No, because it's really -- it's really for our sub-debt, just the rating that we are on.

ChrisYork: Then Howard, last one here. You talked a little bit in your prepared remarks about exemptive relief benefiting AINV. Absolutely that's true. The reason why I bring it up is that Apollo does have involvement with the coalition for business development. So prompt me just to revisit your potential update on the likelihood for exemptive relief for BDCs in the application of AFFP this year.

GregHunt: Right, so that has been actually withdrawn. That approach at this point. We go on more toward a legislative approach and working with the fund-to-fund application that door to the fund-to-fund rules that are being looked at by the SEC and change. So we're looking at that as a better approach. And I think the good thing is that we know-- the SEC became very familiar with this topic. The withdrawal of our application, which was really a function of the direction that they were going in with the fund-to-fund rules.

ChrisYork: Greg, does the withdraw of that application change your potential identification of a probability of the removal of AFFP this year to be [indiscernible]?

GregHunt: No, I don't. If we're able to get in the fund-to-fund rules it actually has a better chance of getting done than it did as a standalone exemption that we were asking for.

ChrisYork: Got it. That's it for me. Thanks, guys.

Operator: Your next question is from Kyle Joseph with Jefferies.

KyleJoseph: Hey, good afternoon guys. Most of my questions have been asked and answered. Just a few modeling ones. In terms of dividend income were there any one-timers in the quarter and what's a good run rate to look for going forward?

GregHunt: Now I think you're fine at $2.8 million to $3 million. It's really coming out of our shipping investment.

KyleJoseph: Got it, that helps. Then it looks like peak income increased in the quarter. What specifically drove that?

GregHunt: What drove it was Bumblebee which had their restructuring approved this weekend. We restructured our position and been paid down on partially subsequent to on quarter-end.

KyleJoseph: I was going to say just stepping back, broadly appreciate Tanner's color on the portfolio metrics but just simplify it in terms of gross revenue and EBITDA, can you tell us where we are versus 3 months ago and versus even a year ago?

TannerPowell: Yes, sure. It's very much been a continuation of the trends that we've seen wherein growth on an organic basis is still positive from a revenue standpoint, but EBITDA or earnings growth is underperforming the magnitude of revenue growth as our companies are grappling with a number of cost pressures. Depending on the industry, obviously things are more pronounced. But freight costs have gone up, wage in certain places, notwithstanding the most recent downdraft in commodity prices, commodity price pressures. So you've seen that in a -- that frankly, has been something we've seen for the last couple of quarters and continued through Q4.

KyleJoseph: Got it. That's it for me. Thanks very much for answering my question.

Operator: Your next question is from Ryan Lynch with KBW.

RyanLynch: Thanks for taking my questions. First one I wanted to talk about your leverage range. When you guys initially passed a 2 to 1 leverage, you guys had a leverage range of 1.25 to 1.4x. That target leverage ranged increased over time to the current 1.4 to 1.6x. I'm just wondering, it seems to be in an environment that we are today, which has a lot of competitiveness for obviously, over 10 years removed from the last credit cycle. I'm just wondering how you guys are getting comfortable increasing your target leverage range? It would seem to be that you would want to increase that range in environments where you're seeing robust activity. There's very good deal flow and very good risk rewards, which I don't think it is how most market participants would characterize this market. So can you just talk about in this environment, how are you getting comfortable and what is the thought process of increasing this target leverage range?

GregHunt: Well, so the first thing I'd say is we are seeing very good deal flow. That's because of what we've sort of focused on for the last few years is that the amount of deal flow today AINV has to take off. So the overall origination of platform is such a small part that even if deal flow across the platform is more constrained because of the market dynamics you talked about, there's a lot of deal flow available to sort of get -- to sort of pick off the stuff that builds our portfolio the right way. We had said 1.25 to 1.4 over really the amount of time to get to about the end of this year. That's what we said about 18 months ago, which is what we've gotten to, and we continue to have these opportunities. What you're asking is similar to one of the previous questions is don't you want your dry powder for other things? The first answer is, we want to -- we believe that it is corroborated by the significant amount of capital that we raised from institutional investors for the same assets across our platform versus a lot of our competitors that we have a very good engine producing proprietary assets. At AINV, the leverage that it's employing obviously is high versus historical levels for BDCs but low -- sorry versus a lot of commercial finance or specific investors leverage these assets. And that's because when you build a portfolio, when you have a wide funnel and you build a portfolio that's granular and broad-based, the ranges of outcomes even in the stretcher part of the cycles is narrowed quite a bit. So the overall answer is, we are being circumspect across our whole platform. Our origination takes into account the challenges of the markets. We reject a huge amount of deals. And we like a few of our competitors, take [indiscernible] for example, because of the size of our platforms and the size of our origination teams still have the ability to differentiate ourselves because of our side and the debt size and the depth of our relationships have enough assets for AINV to grow. And just so Ryan, like the last point I'll say is the leverage loan portfolio at mid-cap has not grown over the past year, even though there's been a lot of origination and that's because it is a larger, more stable. It's already had as much runoff as it generates new business. And it spreads those assets also a lot of balance sheets. So we view the market like you view the market, we just have a very big funnel of deals coming through.

RyanLynch: Okay, that's helpful color, just one more for me and I'm not sure if you mentioned this, but if you kind of hold the portfolio realized and unrealized gains and losses, neutral next quarter under that assumption what percentage of your incentive would you guys expect to earn half zero or what I'm just kind of trying to get a gauge of where that incentive is looking to shake out holding that portfolio depreciation or appreciation constant?

HowardWidra: If there were no losses next quarter, we'd pay the full incentive fee.

RyanLynch: Okay, those are my only questions. Thank you guys.

Operator: Next question is from Robert Dodd with Raymond James.

RobertDodd: Hi, guys. Probably a couple for Greg. On the downgrade you've addressed it a couple of times. If I look at, I mean, obviously if you shift the mix from the facility to more notes or other things that the blended costs would go up. But when I look at the 2025 notes out there trading, they look to me to be trading above par before the downgrade and still above par now. So do you think the Fitch downgrade is going to have any meaningful impact on you're like for like borrowing costs rather than, you know, you mentioned if I go up to four, four, if the mix of types of buying shifts, but do you think that downgrades actually going to affect your like for, like, kind of borrowing cost on the note side?

GregHunt: No, I don't think so. No, and, you know, I think I just quickly did the math, it actually only goes up to four, three, you know, if you do a $200 million offering, you know, you'll be inside of the cost of funds on the our bonds that are outstanding.

RobertDodd: Got it. And then one more if I can or just, I'm having some trouble reconciling some things on the picking come on the P&L or in the queue in the notes $2.6 million was recognized, but in the cash flow or elsewhere in the queue right? There was almost $13 million capitalized. That's the biggest delta in that I've ever seen from you guys. I mean, was that also related to Bumblebee [ph] or could you give us any color on reconciling that because it's a pretty big gap.

GregHunt: We think carbon free, it was our restructuring the carbon free position and to recapitalize the pic that was and not been capitalized prior.

RobertDodd: Okay, so that was the previous nonaccrual that you nonaccrual but you capitalize if you didn't run it for the P&L.

GregHunt: It run through the P&L in prior quarters and it was sitting as an interest receivable and that was capitalized in the restructuring of the debt.

RobertDodd: Okay, got it. I appreciate it. That's all I had. Thanks.

Operator: And your final question comes from the line of Fin O'Shea with Wells Fargo Securities.

FinO'Shea: Hi, thanks for taking my question. Just a follow on carbon free, can you give us to the extent you're able any context on the restructuring, just seeing this was an affiliate investment. So today sort of trip any performance measure? And then a second part to that, how is this de risked beyond your position, converting more so into equity? Or did at the company level is there more reduced debt?

HowardWidra: I'm not first of all, just let me clarify if you're saying it's an affiliate position. I'm not sure what you?

FinO'Shea: On your table like your ownership percentage affiliate.

HowardWidra: Well, I don't think that's. So there's two things that that the restructuring did to make us, you know, more stable. It's what basically, the equity owner of the facility basically, what was running this project, both to produce profit as well as to build off a IP value off sort of a carbon free technology. Our restructure, basically, you know, changed our deal to sort of align us directly with that equity investor. So, we both had debt on our operating company of you will and we had ownership in the IP, that is monetizable in other places we believe and has raise money at a good valuation. And so what we have done in terms of sort of the stability, so one we diversified our collateral, if you will. So we basically the position now has both the previous collateral had before, which is this plant, and it also has this IP, which is separately, had separate value, that's one and two, because of that, and because of allocating a portion of the value to that equity, the debt that the operating companies forced to carry is now much lower. So, the cash flow profile of that entity is it's easy for it to service its debt. You know, it still driven by a commodity price. So it can still have some variability on its ability, but it now has less debt. So it has a much lower burden of debt. You know, also no pick [ph]. You know, want to grow anymore. So it will have something like $33 million a debt that will pace that it can cover, which is far less than have a cover before. And then we have a separate pool of value. And so we view it as meaningfully direct from where it was before. Obviously, we wrote some down as well. So there's less debt, there's less debt to service and as more collateral.

FinO'Shea: Okay, appreciate that color. Just another follow on mid-cap, there was couple of questions. Can you talk about the mid-cap funnel and its allocation across the accounts? That's been obviously growing since Apollo acquired and since you now co-invest with seeing. But seeing you Apollo, the BDC generally on-boarding your L600 last couple of quarters, is this reflective of the overall funnel or is there a tilt, you know was on one in the BC as say L600 staff and then on the other end, you're seen SMEs, you know, with more allocation to the L450 stuff. Would that be directional tilt there or is it even keeled on allocation?

GregHunt: Well, you know we have six or seven separate investors that look to invest in deals and they each have different criteria, some return based on leverage based some industry based it could be it could be anything. And so bye in large, what AINV is doing is the vast majority of the origination in our leverage loan. There is not as much being done in the L450 range. Mostly because that's not where the market is, you know that's people want, effectively 4.5 to 5 times that as opposed to 3.5, 4 times debt for the lower cost. So, just to give you some numbers mid-cap did $13 billion of new commitments last year, about two thirds of that was in leveraged lending. So we know the other third is in life sciences, ABL real estate. And when those deals make sense, that is part of the origination for AINV and it might make sense it basically means they're big enough that AINV can get an enough size that it makes sense for them to do. The other two thirds across our leverage loan book that $6 billion is something like 80 or so loans. You know, there's probably 20 of them that are below the yield profile that and I'm guessing 15 to 20 of them that are below the yield profile that AINV may want to choose to do.

FinO'Shea: Okay, thank you for the color. That's all for me.

Operator: There are no further questions at this time. I'll turn the call back over to management for any closing remarks.

End ofQ&A:

Howard Widra: Thanks. Thank you everybody, for your time today and your continued support. Please feel free to reach out to any of us if you have any questions. Have a good night.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.