Good afternoon, and welcome to the Apollo Investment Corporation's Earnings Conference Call for the period ended December 31, 2021. At this time, all participants have been placed in listen-only mode. The call will be open for a question-and-answer session following the speaker's prepared remarks. If you would like to ask a question at that time, simply press the star and one on your telephone keypad. If you would like to withdraw your question from the queue, press the pound key. I'll now turn the call over to Elizabeth Besen, Investor Relations Manager for the Apollo Investment Corporation. Please go ahead.
Thank you, Operator, and thank you 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 customary earnings press release.
I'd also like to call your attention to the customary safe harbor disclosure in our press release providing forward-looking information. Today's conference call webcast may include forward-looking statements. You should refer to our most recent filings with the SEC 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 our Chief Executive Officer, Howard Widra.
Thanks, Elizabeth. Good afternoon, and thank you for joining us today. I'll begin my remarks with an overview of the quarter and will then provide some additional business highlights. Following my remarks, Tanner will discuss the market environment, review our investment activity for the quarter, and provide an update on credit quality. Greg will then review our financial results in greater detail. We'll then open the call for questions. Over the last several years, we have built a well-diversified portfolio of true first lien floating rate corporate loans invested in less cyclical industries with granular position sizes. Our ability to co-invest with other funds and entities managed by Apollo, including MidCap, allows AINV to participate in larger deals while maintaining relatively small hold sizes on our balance sheet.
As you know, MidCap is the hub of Apollo's middle market direct origination business and is on par with any lender in the marketplace. The overall MidCap direct origination platform was very, very active during the period, closing approximately $7.7 billion in new commitments during the quarter and $19.6 billion in commitments in 2021. The MidCap platform provides AINV with access to a wide funnel of opportunities, which allows us to be selective and find attractive investments. After market close today, we reported net investment income for the December quarter of $0.35 per share. Results for the quarter benefited from strong fee and prepayment income and reflect operating with average net leverage in the middle of our target leverage range. We ended the period with net asset value per share of $16.08, up $0.01 per share.
Our corporate lending portfolio marks had net gains during the quarter. The corporate lending portfolio continues to improve, which Tanner will discuss later during the call. Results for December also reflect the benefit from the monetization of non-earning and under-earning assets and redeploying those proceeds into our core strategies. We have consistently generated cash from our non-core assets, and we are focused on executing some more significant progress in the coming quarters.
During the December quarter, we received repayments of approximately $10 million from three of our non-core positions, two of which were non-earning, which included $4 million from one position without any reduction in NAV and $2 million from one investment, which was $2 million above fair value. We also received approximately $29 million from the repayment of second lien positions.
Post quarter end, Dynamic Product Tankers, one of our shipping investments, closed on the sale of three ships, which will be generating an additional $18 million in cash proceeds at our December 31 NAV in the March quarter. We have visibility into additional monetizations from our non-core portfolio in the coming quarters, and we look forward to reporting our continued progress. Pro forma for the Dynamic sale, non-core assets represent only 6% of AINV's total investment portfolio. Second liens represented only 5% of the corporate lending portfolio at the end of December. Lastly, we repurchased stock during the period of meaningful discount to NAV, which was accretive to NAV per share and moderately accretive to net income per share. Moving onto other business highlights. Our board has increased our share repurchase authorization by $25 million, having nearly completed our existing authorization.
We obviously hope opportunities to repurchase our share at a meaningful discount to NAV do not occur, but when they do, this authorization will allow us to create value for our shareholders. Turning to our distribution. For the quarter, the board has declared a base distribution of $0.31 per share and a supplemental distribution of $0.05 per share. Both distributions are payable on April 7, 2022 to shareholders of record as of March 21, 2022. As a reminder, the dividends being declared today are the last of the dividends that we previously indicated would be maintained at $0.31 for the base distribution and $0.05 for the supplemental distribution. One of our objectives is to provide greater visibility for our shareholders with respect to the distribution.
For the next two quarters, we intend to declare a base dividend of $0.31 per share, plus a supplemental dividend in an amount such that the base and supplemental combined will equal the prior quarter's net investment income per share. This means that next quarter we expect to declare a base dividend of $0.31, plus a supplemental dividend of $0.04 or $0.35 in total, which is equivalent to the NII per share for the December quarter. We expect to have greater clarity in the coming quarters regarding the timing of the embedded upside in our portfolio and the impact of interest rates on our earnings. With that, I'll turn the call over to Tanner to discuss the market environment and our investment activity.
Thank you, Howard. The broader market environment is mixed as economic expansion, good corporate earnings growth, and increased valuations are being balanced by inflationary pressures, the emergence of COVID-19 variants, ongoing supply chain issues, and a more hawkish posture by the Federal Reserve. Specific to our business during the pandemic, non-bank financial institutions have become an even more important source of financing for corporates than banks. Private equity firms were extremely active in 2021 and continue to raise more capital, resulting in significant dry powder. As this dry powder is deployed, the demand for financing is expected to result in considerable investment opportunities for lenders like MidCap and AINV. Moving to AINV's investment activity, new corporate lending commitments for the quarter totaled $271 million across 24 companies for an average new commitment of $11.3 million.
71% of new commitments were leveraged lending, 13% asset-based, 10% life sciences, and 6% franchise finance. Consistent with our strategy, all new commitments were first lien loans with weighted average spread of 639 basis points and a weighted average net leverage of 4.7 times, and 96% were made pursuant to our co-investment order. Elevated repayments offset strong gross fundings, resulting in net repayments for the quarter. Gross fundings for the quarter totaled $234 million, excluding revolvers. Sales and repayments totaled $287 million, excluding revolvers. As Howard mentioned, repayments included $29 million of corporate second liens and $10 million of non-core assets. Net funding for revolvers were $30 million, and aggregate net repayments for the quarter totaled $23 million. Regarding our aircraft leasing portfolio company, we believe Merx has successfully navigated this challenging period.
During the December quarter, the fair value of AINV's investment in Merx increased by $3.4 million or 1.1%, as aircraft leasing fundamentals are showing minor improvements. Turning to the overall AINV portfolio, our investment portfolio had a fair value of $2.59 billion at the end of December across 139 companies in 26 different industries. We ended the quarter with core assets representing 93% of the portfolio and non-core assets representing 7%. First lien assets represented 93% of the corporate lending portfolio. At the end of December, the weighted average spread on the corporate lending portfolio was 605 basis points. We are closely monitoring the impact of cost inflation within our portfolio and its impact on profitability.
We believe our portfolio is generally weighted towards industries that are less likely to be impacted by inflation and supply chain issues. We continue to see improvement in our credit metrics as we reduce our exposure to second lien positions. The weighted average net leverage of our corporate lending portfolio declined to 5.03x, down from 5.1x last quarter. The weighted average attachment point declined to 0.2x, down from 0.3x last quarter. Our low attachment point is a clear indication of the seniority of our corporate lending portfolio compared to loans which are classified as senior but have much deeper attachment points. The weighted average interest coverage improved to 3.1x, up from 3x last quarter.
Investments made pursuant to our co-investment order represented 85% of the corporate lending portfolio at the end of the quarter. No investments were placed on non-accrual status during the quarter. At the end of December, investments on non-accrual status totaled $14 million or 0.5% of the total portfolio at fair value, down from $28 million or 1.1% last quarter. The quarter-over-quarter decline was attributable to the restructuring of our investment in Sequential Brands during the quarter. With that, I will now turn the call over to Greg, who will discuss the financial performance for the quarter.
Thanks, Tanner, and good afternoon, everyone. Beginning with AINV's statement of operations, total investment income was $55 million for the quarter, up 3.9% quarter-over-quarter, reflecting higher fee income and prepayment income, as well as higher interest income, partially offset by lower dividends. Prepayment income was $4 million, up $700,000 for the quarter. Fee income was $1.6 million, up $600,000 for the quarter. The increase in interest income was attributable to a larger average investment portfolio. Dividend income was $500,000 for the quarter, a decrease of $2.3 million compared to the September quarter. We received a $2.7 million cash distribution from MC, one of our shipping investments, which was recorded as a return of capital during the period.
The weighted average yield at cost on our corporate lending portfolio was 7.6% at the end of December, unchanged quarter-over-quarter. The weighted average spread of our corporate lending portfolio was 605 basis points compared to 602 basis points last quarter. Expenses for the quarter were $32.5 million, up $800,000 for the quarter, and included an incentive fee of $5.4 million. The increase in interest expense reflects the growth in the portfolio. Net investment income per share for the December quarter was $0.35. Net leverage at the end of December was 1.52x, up slightly from last quarter as the average net leverage for the December quarter was 1.51x compared to 1.46x for the September quarter.
On page 16 in the earnings supplement, we disclosed the net gain and loss by strategy over the past five quarters. During the current quarter, our corporate lending portfolio had a net gain of $3.7 million, or $0.6 per share. Merx had a net gain of $3.4 million, or $0.5 per share. Non-core and legacy assets had a loss of $9.1 million, or $0.14 per share, driven by losses on our shipping investments.
The loss on shipping primarily relates to the sale of the three ships that closed in January. NAV per share at the end of December was 16.08, a $0.1 increase quarter-over-quarter. The $0.1 increase was attributable to a $0.5 per share accretive impact from buybacks, partially offset by the $ 0.3 per share net loss on the portfolio and the $0.1 from distribution relative to net investment income. Moving to stock buybacks.
During the quarter, AINV purchased approximately 955,000 shares at an average price of $12.99, including commissions, for a total cost of $12.4 million. Since the end of the quarter and through yesterday, AINV had purchased an additional 61,000 shares at an average price of $12.70 for a total cost of approximately $800,000, leaving us with $5.8 million available under the previous authorization. As Howard mentioned, our board has increased our share repurchase authorization by $25 million, which increases the amount available for future stock repurchases of just over $30 million. This concludes our prepared remarks, and please open the call to questions.
At this time, if you'd like to ask a question, please press the star and one keys on your telephone keypad. Keep in mind, you may remove yourself from the question queue at any time by pressing the pound key. Once again, to ask a question, please press the star and one keys on your touchtone telephone keypad. We'll take our first question from Kyle Joseph with Jefferies. Please go ahead. Your line is open.
Hey, good afternoon, guys. Thanks for taking my questions. Just to refresh us, if you don't mind, given what's going on with the Fed, you know, what percentage of your debt portfolio has floors and where those floors are versus rates at this time?
Hey, Kyle, thanks for the question. Elizabeth's grabbing the specific number, but it's in the 90% range that has floors, almost entirely 1%. We see on the life sciences side or some of the specialty verticals, sometimes we see a little bit higher floors. Almost everything we've done on the corporate side is at 1%. Then, as will not be as much of a surprise, in instances where you have a company that is bumping up against the syndicated market, we'll see something slightly lower than 1% at you know, kind of 75 bps. But that's very few. So about, and she has the data for me now. 91% have 1% or higher, and only 3% have no floor at all.
Got it. Very helpful.
Sorry, Kyle.
No, no problem. Then I was just gonna ask one follow-up probably also for Tanner. You know, obviously your credit performance has been very sound. Can you just give us an update in terms of your portfolio companies, in terms of, you know, what they're seeing in terms of inflation, whether it be on the wage side or the raw material side, and any sort of impacts you've seen in terms of EBITDA margins or growth?
Yeah, absolutely. It's everywhere. It's just a question of to what extent the underlying issuer is seeing it, just how pronounced it is, be it on the wage side, as you alluded to, and/or you know, from a supply chain standpoint. You know, we do track underlying revenue and EBITDA growth. We do try to strip out for the companies that are highly acquisitive. On a like for like basis, this is the first quarter that EBITDA did not grow. It was still positive, but not as strongly as revenue, belaboring that underlying dynamic which you're getting at.
You know, we continue to believe that, you know, where we're creating these companies and the fact that we are top of the structure, that, you know, our ultimate credit performance will have less to do. I say nothing about, you know, whether these type of pressures ease over the coming months or not. Notwithstanding, given where we're creating these companies and our underwriting, I believe that they can stomach a certain amount of cost pressure before such time as we would expect, you know, our loss experience to change materially.
Got it. Very helpful. Thanks a lot for answering my questions.
We'll take our next question from Kenneth Lee with RBC Capital Markets. Please go ahead. Your line is open.
Hi. Thanks for taking my question. Wondering if you could elaborate on the visibility that you have into additional monetizations from the non-core portfolio over the near- term. Perhaps just talk about what could be driving that potential activity there. Thanks.
Yeah, sure. Basically, you know, we're focusing on sale processes on a couple of the sort of the more meaningful positions. We hope to have at least one of those sort of something to say on one of those in the near future. That's and then separately, you know, we are generating cash off of a few of those positions. Now, like most notably, Glacier is producing quite a bit of cash. You know, we expect that to continue to produce cash. I mean, it may not, like this quarter, the NAV may not go down despite the cash coming in because of, you know, the price of oil and the performance.
There could be more upside there. There's clearly an ability for that company to make more cash. Strategically, I mean, we're now the DPT transaction is off the books, but the MC transaction has historically generated some cash and, you know, that can generate cash which goes towards basis or for earnings, but, you know, is a positive cash generator. All of those combined, you know, is where it comes from. Basically, you know, the focus is on Spotted Hawk and MC to get some significant cash out of those in the near future.
Gotcha. Very helpful. Wondering if you could share with us your thoughts around potential originations activity this year, especially in comparison to what you saw last year. Thanks.
Yeah, I mean, you know, obviously we had a record year of origination, I think as did a lot of our, you know, a lot of our peers. That was the result, I think of, you know, two things, of a lot of private equity activity and dry powder. There's still a lot of dry powder. Maybe the activity probably doesn't go up. You know, as importantly, the continually increased market share of private credit versus both banks and the broadly syndicated market. That trend we expect to continue.
If you assume, you know, the pie is getting bigger, which I think is sort of the right assumption, you know, we would expect, you know, origination volumes to be, you know, lower than the run rate of the fourth quarter, but at least as good as it was for the full year, next year. You know, there continues to be an advantage for the people who have the ability to speak to larger commitments and have size and multiple pockets of capital, of which, you know, Apollo falls into that category of one of them. That's obviously important. It's like, you know, an arms race in some regards, so you got to just keep on working on that. We continue, you know, to make progress there.
If you look at, you know, origination activity through this first five weeks of the year is good, strong, on a run rate as good as that. But frankly, that's, you know, some carryover from the end of last year. You know, you'd have to sort of look forward to the pipeline over the next two or three months to corroborate what I just said. But that's that I feel like our full year origination should be close to what our full year origination was this year, would be a reasonably conservative estimate.
I might add to that quickly, Ken, as you'll know all too well, the lion's share of the originations for us and our peers will and always be likely from the sponsor part of our business. We continue as we called out in our prepared remarks and continue to market good flow that hits our target ZIP code from a yield perspective in our other verticals such as life sciences and ABL. That's a nice adder to the opportunity set for MidCap in this year and others as well.
Great. Very helpful. Thank you very much.
We'll take our next question from Casey Alexander with Compass Point. Please go ahead. Your line is open.
Yeah, good afternoon. First of all, I'd like to applaud you for going to the, you know, essentially a variable dividend structure. I think that is gonna be the [Non-English content] for many BDCs going forward. I'm wondering, did the board consider setting the next quarter's dividend at somewhere around, you know, between 96% and 98% of the previous quarter's NII, just so that you could retain some of that income for NAV growth and to put, you know, sort of a rainy day fund away for when there may or could be credit losses at some point in time in the future?
Yeah, I mean, you know, 98% is less than a penny, right?
Mm-hmm.
You know, I think it's a very good question. I think what we're trying to focus on is we believe we will be able to provide great visibility into our earnings capability, you know, ex these core assets, which we're very focused on lowering. Obviously now there's gonna be some interest rate changes, you know, given the fours that will impact something too. I think our thought process is let's keep it variable based on the earnings, as you said, and then provide real visibility going forward, which we think will be very predictable and expect to be, you know, like a growing dividend base. Once we have that clear picture, you know, we have a guess of where that's gonna be. At that point, you know, it would be right to set the dividend, you know, slightly below the core earning power for the reason you said.
Mm-hmm.
It's just more that we still think we're in this transition, and that transition also includes, you know, what has been a process pre-COVID and now it's becoming a process again, which is lowering the concentration in Merx as well.
Okay. Great. Thank you.
Does that make sense? Yeah.
Yeah, no, it definitely. I also want to ask about the share repurchase program. Again, I think shareholders welcome the aggressive nature of the share repurchase program. But you are at, you know, over 1.5x levered, and when you repurchase shares that automatically increases your leverage ratio. How do you think about the share repurchase program? Are you thinking about it in terms of as you sell down non-core, you're using proceeds from non-core to repurchase shares? Or, I'm just curious how you think about it because at some point in time, without raising new equity, the share repurchase program is gonna push that leverage ratio up towards the top of your target range.
Well, I think the way we think about it is, you know, like this quarter we did, you know, $200+ million of new origination, and we had, you know, net neutral growth. This is just some of that origination, right? It's like the return on this investment is, you know, at face value of NAV is better than a new loan. On the other hand, it does shrink stuff and it's permanent, right? It doesn't get paid off and roll. It has to be, you know, pretty accretive. I think if you ask us, like, how do we think about it? We don't think about it like, oh, we're using non-core money.
I think we're thinking about it as like it is an investment that is, you know, really positive for the shareholders. You know it's basically a higher return than a loan with no credit risk and no fee against it. You have to consider it in the full package of things, especially while you're repositioning everything. You're definitely right that higher leverage, you know, the higher your leverage is, the higher premium you have to get to be able to make that the right choice.
Right. Okay, great. Thank you. I'll step back in the queue and perhaps come back later.
We'll take our next question from Matt Tjaden with Raymond James. Please go ahead. Your line is open.
Hey, everyone. Afternoon. I appreciate you taking my questions. First one for me on the dividend income line. So you know there's a little noise there with the return of capital from MC. Howard, I think you said last quarter we could expect about a $1 million run rate in that line item from MC, going ahead. Does that still hold today?
Yeah. I mean, I think, you know, it generates those types of returns and cash. We would expect to produce that type of cash. You know, whether it's a return on capital really depends on sort of, you know, effectively the valuation. You know, it is income, but it is either income or return of capital. If you're going to, like if the valuation of the asset's going down, we don't think it's right to be taking income off something that you put a basis. You know, the right way to think about it is, yeah, it generates that income going. That is effectively its return on a run rate basis on average over quarters. We sold one ship last quarter, and so that caused some change in the valuation greater than it would be based on sort of, you know, shipping rates.
Got it. Makes sense. Maybe next one for me, pivoting in the non-core book to maybe more so oil and gas. It sounds like the shipping activity is pretty healthy. Does recent strength in the oil and gas markets maybe speed up the timeline at which you think you can dispose of Glacier and Spotted Hawk?
Yeah. Well, yes. Spotted Hawk, I mean, I think it definitely speeds it up. There's more interest in it, and we're focused on sort of, you know, having a process. We have, you know, a number of interested parties who have, you know, much more capabilities now. You know, that has always been sort of, you know, it is a, it's an exploration play as opposed to oil currently coming out of ground. So its valuation has always been sort of have a broader range, but there's definitely more interest because more people are putting up assets. Glacier is actually more interesting, which is, you know, we basically invested a little bit of money to reopen some wells, and we're benefiting from that from a cash basis.
I don't know if it was clear in the remarks, but like in Glacier, we realized $4 million of cash out of there, and the mark didn't go down at all. Effectively, there's a $4 million increase in value in Glacier, and oil's only gone up since then and it's continuing to produce well. We do think that there's more likely to be buyers out there, and we will look to that, but we're also pretty comfortable with the cash it's producing real time.
Got it. Fair enough.
That's so-
Last one for me.
That's solely oil price related.
Got it. Last one for me, maybe following up on Casey's question. Understand, you know, kind of from a no net growth perspective on the share repurchases. If you were to get into visibility, you know, on maybe like repurchases slowing down or something like that, given where you sit above the midpoint of your leverage range, if you got more into a net growth position, would you expect the pace of share repurchases to slow down?
Yes. I mean, you're saying if we were growing from here? Yes. I mean, I think you would expect if we're holding this even this leverage level now, at the same stock price, you would expect it to slow down a little bit. We, you know, so yes, I mean, I think is the answer. You know, if there's significant monetization such that our leverage goes down meaningfully, then that's when more likely it's supposed to pick up. But this is, you know, it was a pretty active quarter this quarter.
Got it. That's it for me. I appreciate the time.
We'll take our next question from Ryan Lynch with KBW. Please go ahead. Your line is open.
Hey, good afternoon. Can you guys go over your comments relating to Dynamic Product Tankers? I didn't quite follow it all the way. It looks like you guys had about a $12 million, you know, loss or write-down this quarter in your shipping book, but then you talked about the closing of the three ships, and I thought I heard maybe $18 million of unrealized gains in the March quarter. Can you just recap all that? I wanna make sure I have all the details correct.
Yeah, I'm happy to. Thanks for the question, Ryan. The three of the four ships within our Dynamic Product Tankers investment were monetized in this quarter. We had negotiated those sales as of the end of last quarter. The write-down reflected the monetization of those positions. The $18 million, which has largely been received to date, subject to some normal closing conditions and closing process, was the return of capital and not a gain in this particular quarter. We're very focused on looking to monetize the fourth ship as well.
The $18 million that you mentioned, that's just cash coming back in from the monetization as just to be recorded as return of capital. No impact on your income statement, correct?
Correct.
Okay. Thanks for the clarification on that. Then, you know, you mentioned Merx's as sort of you think gotten through the worst of it regarding kind of the COVID downturn. What specifically this quarter drove the increase in the valuation of Merx's?
Yeah, sure. As you can probably imagine, it's a portfolio across 75 planes and there's normal puts and takes, but on the margin, more positive than negatives as we continue to work through our COVID-related challenges with respect to our underlying lessees. Then importantly, another driver in this particular quarter is the dynamic we've talked about at length, Ryan, with respect to the fact that we have other pools of capital at Apollo for which we serve as the exclusive servicer for those assets. As we get those opportunities, we get the benefit of the servicing revenues without stretching the AINV balance sheet.
Some of that gain that we saw in the particular quarter was owing to the stabilization that Howard and myself alluded to, augmented by this dynamic as we continue to invest capital away from AINV, and benefiting our servicing revenue.
Okay, understood. I appreciate the time this afternoon.
As a reminder, if you'd like to ask a question today, please press the star and one keys on your telephone keypad. We'll take our next question from Melissa Wedel with J.P. Morgan. Please go ahead. Your line is open.
Thank you for taking my question. Good afternoon. Wanted to touch on the yield on debt investments. It's been quite stable, quite resilient over the last few quarters despite some spread compression in the market. I was hoping you could kind of go over the drivers of that stability and if that's something that you think can persist through this year. Thank you.
Yeah. It's been stable because of just like our, and we've said this before, like, you know, there was $7.7 billion of origination at MidCap this quarter, you know. So we are choosing the assets here that, you know, that fit our criteria, which is like, you know, the right credit, the right credit components, but also that hit the yield profile. So if we had to originate six times as much, you would've seen more yield compression 'cause there's certainly that yield compression across all of the business.
Just because of the breadth of the pipeline, you know, you know, we're able to sort of, you know, select what fits, including, as Tanner said, you know, assets that aren't necessarily all leveraged loans, but in some of the more, you know, bespoke asset classes. You know, the stability is the result of sort of the selectivity of AINV versus the pool of everything that's available.
At the risk of overemphasizing, but you do often see with the dynamics of people trying to get deals done before year end. I wouldn't read into it a spread widening, but sometimes just the sheer surfeit of deals that were in the market gave a little bit of pricing power to lenders on the margin that I wouldn't necessarily read too much into it, but that helped to, you know, augment or give some, you know, some benefit in what we were able to do from a spread perspective in Q4.
As a follow-up to that, given the strength of, you know, the credit profiles of companies right now, is that something that you're willing to sort of use, you know, the benign credit environment to sort of subsidize and spread when it comes to new investments? Thank you.
I don't know if I understand the question, just to make sure. What do you mean?
Sure. To the extent that, you know, losses could be lower, you know, terms to borrowers are quite friendly, it could speak to, you know, a supportive credit environment, especially with some macro tailwinds for companies, despite recent sort of inflationary pressures. I guess I'm wondering if your outlook is for continued benign, you know, solid credit performance from portfolio companies, does that make you willing to dip down a little bit more on spread than you otherwise might?
First of all, I mean, again, it's a different question where we are in our leverage point. You know, we have a certain level of sort of, you know, return we wanna deliver to the shareholders that we feel like we can do at these yields while keeping ourselves at our target leverage. Unless one of those measures change, like, you know, things don't change unless the macro environment doesn't allow those assets to become available. Obviously, like if there was something like we thought the risk was way too high, we'd have to dip down. If we thought
I don't think, you know, right now for us it's actually an issue of us not doing as many of the deals we wanna do at the yield we're at, or not as many of the deals, having our hold size as big as we might otherwise be because of our leverage point. Because we, you know, diversity is important for us and that helps. From time to time we're choosing, you know, multiple assets as opposed to like bigger holds. I, you know, the macro environment obviously is whether it's benign or not. I mean, frankly, like we always try to. We, you know, these are five, six -year loans. We're underwriting like it ultimately won't be benign. You know, it has to withstand pressures.
There are some macro pressures on companies across the board. I don't know if the macro environment impacts our choices, at least where we are today.
Appreciate that. Thank you so much.
We'll take our next question from Finian O'Shea with Wells Fargo Securities. Please go ahead. Your line is open.
Hi, everyone. Good afternoon. Can you remind us or touch on the interplay with Apollo's broader platform with the newer non-traded BDC up and running now?
Sure. The non-traded BDC has a different focus. Its strategy is basically larger deals that are originated through sort of relationship with larger sponsors. They expect to have a portfolio that's 75%, not like in the range of assets that AINV use as core to its strategy. They do expect to do 20% of their portfolio in assets that sort of fit a part that's core to AINV's strategy in the leveraged loans. Not the other asset class we do in leveraged loans.
Those deals, though, will be in the higher end of the middle market that, say, we take companies in, you know, $60-$70 million of EBITDA where there is lots of effectively there is plenty of loan to go around, if you will. Those are $300 million underwrites, and there is lots of vehicles at Apollo that are taking part of it, including this non-traded BDC. We view sort of the non-traded BDC as very complementary to our overall.
When I say we, it is Apollo. Apollo's overall approach to the market, because it just gives us a lot more capabilities to underwrite the deals at the higher end of the middle market, and then obviously also in the larger market for them. That's where it falls, and we've seen that like in this first quarter now in closing some of the bigger deals where you know both AINV and ADS are in.
That's very helpful. Just to recap, actually, so I have it right. About 20% overlap with sort of a core MidCap asset, 60-70% of EBITDA. But 75% of it, the bulk of their assets are issuers that are, you know, much too large or are upmarket for you. Is that right?
Well, either broadly syndicated or large. Right. When I say like they have something that says 20%-30% middle market lending. I said like a quarter, you know. Obviously, as they build their portfolio and the market, you know, has more and more large origination, their percentage will fluctuate, but that will be right directionally as it grows. They expect to have, you know, 50%-70% of their assets in larger corporate loans that are originated. And 20%-30% in middle market and 20% and the rest in broadly syndicated. And you know, obviously, we're not doing broadly syndicated anymore, and the larger loans we're not doing as well.
Very well. That's helpful. That's all for me. Thank you.
There are no further questions in the line at this time. I'll turn the program back to our speakers for any continued or closing remarks.
Thanks. Thank you, everybody, for listening to today's call and for your questions on behalf of the team. Thank you for all your time, and feel free to reach out if you have any other questions. Have a good day.
This does conclude today's program. Thank you for your participation, and you may now disconnect.