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Apollo Investment (NASDAQ:AINV)

Q1 2013 Earnings Call

August 08, 2012 10:00 am ET

Executives

Elizabeth Besen

James Charles Zelter - Chief Executive Officer, Chief Investment Officer and Director

Edward J. Goldthorpe - President

Gregory W. Hunt - Chief Financial Officer and Treasurer

Analysts

Mickey M. Schleien - Ladenburg Thalmann & Co. Inc., Research Division

Troy Ward - Stifel, Nicolaus & Co., Inc., Research Division

Kannan Venkateshwar - Barclays Capital, Research Division

Richard B. Shane - JP Morgan Chase & Co, Research Division

Jasper Burch - Macquarie Research

Jonathan Bock - Wells Fargo Securities, LLC, Research Division

Operator

Good morning, and welcome to Apollo Investment Corporation's Earnings Conference Call for its quarter ended June 30, 2012. [Operator Instructions] I would now like to turn the call over to Elizabeth Besen, Investor Relations Manager for Apollo Investment Corporation. Please go ahead.

Elizabeth Besen

Thank you, operator, and thank you, everyone, for joining us today. With me today are Jim Zelter, Chief Executive Officer; Ted Goldthorpe, President and Chief Investment Officer; and Greg Hunt, Chief Financial Officer.

I'd like to advise everybody 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 of companies. You should refer to our perspective and shareholder reports for risks that apply to our business and 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 Jim Zelter.

James Charles Zelter

Thank you, Elizabeth. This morning, we issued our earnings press release and filed our quarterly 10-Q. I'll be giving my remarks today with some financial highlights for the quarter, followed by a review of some other recent business highlights. Following my remarks, Ted will provide a brief overview of the current market environment, and we'll then review our investment portfolio activity for the quarter, and finally, Greg will discuss our financial results in detail. We will then open the call to questions.

Today, we reported for the quarter net investment income per share of $0.20, excluding a $0.01 net nonrecurring expense relating to our new $1.14 billion senior secured credit facility. Net asset value per share was $8.30 per share at June 30 compared to $8.55 at the end of March, a 3% decline.

During this June quarter, we continued to sell investments in an effort to optimize our portfolio and demonstrated that we were selective and patient investors, as we invested $199 million and received proceeds from sales and repayments of $255 million.

As a result, the fair value of our investment portfolio is approximately $2.58 billion at June 30 compared to $2.68 billion at the end of March. Given our continued focus on improving our overall portfolio yield without compromising relative risk, coupled with our current view of the market, we remain disciplined investors and have continued to deleverage.

We believe that we are well positioned in terms of our liquidity to take advantage of future market opportunities. During the quarter, the credit markets were more volatile, but ended on a strong note in June.

While concerns grew over the European debt crisis and the slower U.S. expansion, the credit markets proved resilient, given good market liquidity, a weak M&A pipeline and record low U.S. Treasury rates.

Given the strength in the syndicated markets, and the competitive nature of the mezzanine markets, we saw fewer opportunities to deploy capital this quarter consistent with our strategy. Second lien bank debt remained active. And like in past periods, when the credit market saw enhanced volatility, mezzanine debt became more actively sought by issuers, given the product's stable terms and attractive rates.

Given the aforementioned market characteristics, as I mentioned earlier, we remained extremely disciplined during the quarter, opportunistically, repositioning the portfolio in new investments, which we believe support the long-term fundamentals of sustained growth.

Furthermore, the added liquidity in the marketplace allowed us the ability to improve our security position without jeopardizing yield and net investment income.

And lastly, we continue to review alternatives and allocate our resources to new verticals for primary and secondary opportunities.

Turning our discussion to our dividend. The Board of Directors approved a $0.20 dividend for shareholders of record as of September 13, 2012.

Based on our closing share price yesterday and annualizing the dividend, our stock currently offers a dividend yield of approximately 10.2%.

With that, I will turn the call over to Ted to discuss the current market environment and our investment portfolio.

Edward J. Goldthorpe

Thank you, Jim. Despite some volatility in the credit markets during the June quarter, the new issuance market remained strong, although volumes declined from prior quarter's record level.

Opportunistic transactions, such as refinancings, declined, while LBOs and underwritten transactions continue to be executed. High-yield indices fell inter-quarter, but essentially ended unchanged from the beginning of the quarter.

As we've discussed with you in the past, we are methodically working to broaden our investment portfolio to provide a wider array of propriety debt solutions. While we've made some progress, we currently continue to expect that it'll take approximately 18 to 24 months to reposition our portfolio.

We believe that taking advantage of the deep industry knowledge, which exists within the broader Apollo platform, provides us with a distinct competitive advantage to generate propriety yield-oriented products.

A significant amount of our recent originations have been sourced from the Apollo diversified platform, which demonstrates the unique benefits we receive as a result of our affiliation with Apollo.

Moving to our investment portfolio. Since the end of March, we have opportunistically reduced our investment portfolio by $56 million and correspondingly reducing our leverage. But more importantly, we believe that these actions leave us very well positioned to take advantage of market opportunities in the near term.

Given the liquidity in our portfolio and our intention to broaden our investment mandate, during the quarter, we sold some of our lower yielding investments and reinvested a portion of that capital into positions which we believe have a more attractive risk-adjusted return.

We chose not to fully deploy capital generated from sales, given our belief that the credit markets will continue to be in a period of uncertainty.

As we've noted previously, we are increasing our exposure to the energy lending space. Our focus is on domestic, long-dated producing assets, with lending on a secured basis against hard assets. We believe our energy lending team provides us with a unique specialization of analyzing and underwriting nontraditional energy credits that other financial institutions may have difficulty understanding.

Given the size and scale of Apollo Global Management's natural resources platform, we are seeking to leverage other resources within Apollo that have experience and proprietary knowledge of the space to source attractive risk reward credits.

As discussed earlier, this expertise has already started translating into origination growth. And during the quarter, our Houston-based energy team made investments in 4 companies, a couple of which I'll provide more detail on shortly.

With that said, during the quarter ended June 30, we invested $199 million in 10 new and 3 existing portfolio companies. We also received $169 million of proceeds from selected sales and $86 million from prepayments.

The yield on new debt investments was 13.1%, and the yield on debt investments that were sold or repaid was 10.6%. The 250-basis point improvement in yield resulted in an increase in 22 basis points in the overall yield of our debt portfolio to 12.1% compared to 11.9% at March 31.

We rotated out some of our senior -- some of our subordinated debt investments, which represented 58% of the portfolio at the end of June, or 60% at the end of March, and into other investments that we think have a more attractive risk-adjusted returns.

We estimate that out current portfolio has approximately $1 billion of investments that could be readily sold at or near our current mark in today's market.

Key portfolio activity for the quarter included a $40 million equity investment and a senior loan vehicle managed by an affiliate of Madison Capital Funding.

In April, Apollo Global Management announced a strategic relationship with Madison Capital Funding, which is a leading middle-market senior lender, an outstanding track record and reputation.

Madison typically makes senior secured loans to companies having EBITDA of $40 million or less. The vehicle known as Kirkwood Fund I was initially populated with approximately $250 million of loans. We are in the process of working on a second investment with Madison, which we currently anticipate will close later this calendar year.

With regard to energy investments, we invested $57 million in a senior unsecured loan to Chesapeake Energy. Chesapeake is the second-largest producer of natural gas and is also producer of oil and NGLs and is the most active driller of new wells in the United States.

We also invested $40 million in a proprietary secured loan to Miller Energy. Miller Energy Resources is a high-growth oil and natural gas exploration, production and drilling company operating in multiple exploration and production basins. The Miller loan was an enterprise led facility with first lien coverage to an asset strong entity with compelling economics.

I now like to review some of the general portfolio statistics as of June 30. We continued to be diversified by issuer and industry with 64 portfolio companies invested in 30 different industries. The company's total investment portfolio had a fair market value of $2.58 billion with 5% in first lien senior secured loans, 25% in second lien senior secured loans, 58% in subordinated debt and 12% in common and preferred equity measured at fair value.

As I previously mentioned, the weighted average yield on our overall debt portfolio at our current cost at June 30 rose to 12.1% compared to 11.9% at March 31.

The weighted average yield on our subordinated debt portfolio rose to 12.9% compared to 12.7% in the prior quarter. And the weighted average yield on our senior secured, senior loan portfolio rose to 10.6% compared to 10.2% at March 31.

Since the initial public offering of Apollo Investment Corporation in April 2004 through June 30, 2012, our invested capital has totaled $9 billion in 176 portfolio companies in transactions with more than 100 different financial sponsors.

At June 30, the weighted average EBITDA of our portfolio companies continues to exceed $250 million, and the weighted average cash interest coverage of the portfolio remained at over 2x. Regarding our risk rating, the weighted average risk rating of our portfolio rose to 2.3 compared to 2.2 measured at cost at March 31, 2012 and 2.2, compared to 2.1 measured at fair market value at March 31, 2012.

With that, I will now turn over the call to Greg, who will discuss our financial performance during the fiscal quarter.

Gregory W. Hunt

Thank you, Ted. Consistent with our efforts to maintain transparency, I would like to remind everyone that in addition to our 10-Q, we have posted a financial supplement presentation on our website. We welcome any suggestions for making our reporting more informative and easier to follow.

I will now discuss Apollo Investment Corporation's financial performance for the first fiscal quarter ended June 30, 2012.

Our total investment portfolio had a fair market value of $2.58 billion compared to $2.68 billion at March 31, 2012. At June 30, net assets totaled $1.68 billion, with a net asset value per share of $8.30. This compares to net assets totaling $1.69 billion and a net asset value per share of $8.55 at March 31.

The decrease in NAV for the quarter was mostly driven by unrealized losses on non-traded securities. On the liability side of our balance sheet, we had $1 billion of total debt outstanding at June 30, essentially unchanged from March 31.

At June 30, the company's debt-to-equity ratio was 60 -- was 0.61:1 compared to 0.60:1 at the end of March. Our leverage ratio which compares to our net debt outstanding, divided by our equity, was 0.53:1 at the end of June, down from 0.59:1 at the end of March.

One investment, a junior preferred equity position in Griffin Colleges was placed on nonaccrual status in the June quarter. In addition, our portfolio has 3 positions in ATI on nonaccrual status at the end of June.

At June 30, nonaccrual investments represented 0.1% of the fair value of our investment portfolio, unchanged from June -- from March 31.

On a cost basis, these investments represented 2.2% of our investment portfolio at June 30 compared with 1.9% at the end of March.

As for operating results, total investment income for the quarter totaled $80.3 million, a decrease from $85.2 million in the March quarter and also down from $94.6 million for the comparable June 2011 quarter. The sequential decline is attributable in part to the semi-annual dividend from the AIC Credit Opportunity Fund that we received in the March quarter, as well as a decrease in the size of the investment portfolio, partially offset by the improvement in yield.

In addition, expenses for the June quarter totaled $41.6 million. Excluding the $1.1 million impact relating to the refinancing of our revolving credit facility, expenses were $40.5 million. This compares to $44.2 million for the quarter ended March 31, and $46.9 million for the comparable June quarter. Net investment income totaled $39.8 million or $0.20 per share, excluding the nonrecurring expenses related to our refinancing of our revolving credit facility. This compares to $41 million, or $0.21 per share for the March quarter, and $47.7 million or $0.24 per share for the comparable June 2011 quarter.

Also during the June quarter, we received proceeds from the sale of investment and prepayments totaling $255 million. There were net realized losses of $18.8 million associated with these sales and exits. These quarter results compared to a net realized loss of $0.3 million for the March quarter and a net realized loss of $45.9 million for the June 2011 quarter.

Notable contributors to the realized losses for the 2012 quarter include Alliance Boots, Ceridian, Catalina Marketing, Avaya. The portfolio change on the net realized depreciation totaled $31.5 million for the quarter ended June 30. This compares to net realized appreciation of $76.5 million for the quarter and net unrealized depreciation of 1.7 for the comparable June quarter.

Notable contributors to the unrealized appreciation for the June 2012 quarter include our investments in PlayPower and inVentiv Health, BCA Osprey, Generation Brands, Delta Education, Altegrity and Square Two Financial Corp., among others.

Contributors to the unrealized depreciation for the quarter include investments in our AIC credit opportunity funds, Ceridian and Travel Port, among others.

In total, our quarterly operating results decreased net assets by $10.6 million, or $0.05 per average share outstanding, excluding the nonrecurring revolver costs versus an increase of $117.2 million or $0.60 per average share for the March 2012 quarter, and an increase of $0.1 million or flat on an average share basis for the comparable June 2011 quarter.

I will now turn the call back to Jim, who will provide a few remarks before we open the call to questions.

James Charles Zelter

Thank you, Greg. As you heard from us today, we continue to be an opportunistic seller and a selective investor. We believe that we have demonstrated signs of progress in repositioning our portfolio, and we will continue to highlight various benchmarks of success in the future.

With that, operator, please open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from the line of Mickey Schleien with Ladenburg.

Mickey M. Schleien - Ladenburg Thalmann & Co. Inc., Research Division

My question is the following. Given your comments that it could take up to 2 years to reposition the portfolio, but in the meanwhile, your net interest margin is quite attractive. I'm trying to get a sense of when will we start to see some net portfolio growth on a quarterly basis? And if you could give us a sense of the investment pipeline or backlog as well?

James Charles Zelter

Well, I guess, what -- the theme of our comments this morning and the theme of our comments is certainly, we'd like to grow our portfolio in the methodical basis, but we're really, first and foremost, focusing on increasing the overall yield on our portfolio. So this quarter, you saw the numbers that Ted and Greg mentioned, north of 13% for our new investments versus selling assets around 10%, 10.5%. We like that theme. We like to accompany that theme with a growth in the portfolio. But getting that achieved first is our primary goal. We have, looking at the marketplace, there was a lot if second lien activity in the quarter that, while, we thought were interesting credits, didn't have the yield characteristics that made sense for us. So it's our suspicion with what we're seeing in our front end right now, we're seeing a bit more of activity. We also don't see a lot of repayments coming from the remainder of our portfolios the rest of the year. So I don't want to start predicting our quarterly flow, but with a cautious tone to the overall backdrop of what we're seeing in some of our portfolio companies as a firm, we've been a cautious investor here. So we -- I think what we're trying to show is we're not afraid to shrink our portfolio if we can do so while maintaining our NII, and we certainly look forward to growing in the future to have a platform growing as well.

Operator

You're next question comes from the line of Troy Ward with Stifel Nicolaus.

Troy Ward - Stifel, Nicolaus & Co., Inc., Research Division

To follow up on kind of your focus on portfolio yield. Obviously, in this quarter, we saw one of the senior pieces, Miller, $40 million, I think it had an 18 handle on it. Can you just give us some color on that investment, and how you're able to get an 18% yield on a first lien investment?

James Charles Zelter

Let me -- I'll talk a little bit, Troy, and Ted can talk about it, but I think it really is, this is what we're talking about really using our overall franchise and front-end to do a variety of enterprise lending. As you know in the past, we don't go into great detail on any individual investment. But I think the theme of our energy team is trying to do that across the board. But I'll pass along to Ted to give any other comments.

Edward J. Goldthorpe

Yes, I mean, I think that in Miller Energy specifically, the team that we hired from -- the team that came over here that started our Houston office had a long institutional knowledge of the assets. I also, in my previous job, also had knowledge of the assets. We feel very, very good about the enterprise coverage of the company. It's a public company, so you guys should go to the public financials on it. And we feel like we saw the solution for them, and at the same time, we feel really, really good about how we're positioning the capital structure. And I think it hits the theme of a lot of what we're trying to do, which is it's a first lien piece of paper that has a lot of asset coverage that we feel really, really good about them being able to service our interest.

Troy Ward - Stifel, Nicolaus & Co., Inc., Research Division

And is that $40 million part of a larger tranche? Are you the whole tranche?

Edward J. Goldthorpe

So we are the whole tranche. And they have, under certain conditions, the company has the ability, if they hit certain thresholds. They have the ability to upsize our loan slightly from where it is today.

Troy Ward - Stifel, Nicolaus & Co., Inc., Research Division

Okay, great. And then quickly on Griffin. As I look at just the individual pieces you have in Griffin, which I believe is Delta, it's kind of odd that you had a convertible equity piece last quarter. It was marked about $0.50 on the dollar. It goes on nonaccrual and it's now marked at 0. But yet, you have other preferred pieces that are marked at or even above par. Can you just kind of give us kind of what's going on with Griffin? And in particular, kind of how you've structured your investments, where certain ones seem to be struggling mightily, while others you have a lot of confidence in?

Edward J. Goldthorpe

Yes, I mean, that name specifically -- and you're right, that's Delta Education. I think we feel good about how we're positioned there. I think that the problem with the -- it's more of an industry issue, as you know. Across the board, there's a lot of headwind space for the, for-profit education space. If you look at the, if you actually went through the capital structure of the company, the piece that we put on nonaccrual is a very, very small piece at the very bottom of the capital structure, behind all the rest of the debt. So the other securities that we own, we feel very good at where they are in the capital structure. And the piece that we put on nonaccrual, although the company is doing okay, it's more of a macro industry issue that we thought it be the right to do to put on nonaccrual.

Troy Ward - Stifel, Nicolaus & Co., Inc., Research Division

Can you provide -- obviously, the $26 million preferred equity piece, can you provide what is the debt through that piece in the capital structure? Kind of where that's leveraged through that piece?

James Charles Zelter

Troy, we typically have not done that. I think what we -- the overall leverage of this company, if you looked at it versus the overall marketplace, you'd find it to be very -- not levered anywhere near what the other peers are in terms of a consistent of companies levered 4x to 6x. It's well below that, but I think it's our view that the education space, because of the constant headwinds from the front, it's prudent for us to be thoughtful and to be aggressive about how we mark that. But this is not what we would consider an over-levered piece of paper, but it's certainly an industry where the valuations, in aggregate, have come down dramatically.

Troy Ward - Stifel, Nicolaus & Co., Inc., Research Division

Okay. And then one final one on Madison. You obviously funded that commitment in the quarter. Can you just give us a little color on what's going on there? How much, if any, income was generated in the quarter from that? And what would you expect from that going forward?

James Charles Zelter

It's been fully funded -- the portfolio's fully ramped right now. A small amount hit our numbers for quarter. It was a partial period, so I think it's less than $1 million in aggregate. But you'll see a run rate going forth on that going forward. And I also would add that on our supplemental information, when you see what our portfolio is yielding, that really is in our debt portfolio. But obviously, our equity investment is really the Madison piece. So the return that we're getting on that would be increase the yield of our overall portfolio. But to answer your specific question, it was a stub period. I think it was less than $1 million, but we would expect that going forward to be fully functioning contributor to our growth [ph] investment income on a quarterly basis.

Troy Ward - Stifel, Nicolaus & Co., Inc., Research Division

And then one final one. In subsequent events, you talked about $75 million of commitments to purchase secured loans that have been terminated. Can you just remind me what that is? Had to do with AIC, I believe.

Gregory W. Hunt

Those were a couple of bridges that we made that we actually did not get funded, but we received the fees on. And therefore, the commitments expired because the financing was completed in the public markets.

Operator

Your next question comes from the line of with Kannan Venkateshwar with Barclays.

Kannan Venkateshwar - Barclays Capital, Research Division

My question was on the portfolio. I mean, you've mentioned in the past that it'll take about a year, 24 months to reposition the portfolio. Could you give us some color in terms of what kind of origination platform you're building around that? I mean, is it mainly platform similar to Madison? Or is there something more beyond that to reposition the portfolio?

Gregory W. Hunt

No, we specifically -- great question as we think about the future of our business. But we specifically are not going to build a platform like Madison has. I mean, for our, as we stated before, our ability to do something with Madison, where we really use their platform and use our infrastructure, as well as our capital, that's a great partnership. What we're really doing is we're using the breadth of the Apollo platform, like we're doing right now in the energy space. And as we alluded to in some other industry silos, which we'll be building, we're fortunate in Apollo right now as an alternative asset manager with $105 billion in assets. There is a tremendous amount of industry dialogue that occurs that we are tapping into greater [ph] than we have in the past. And from our perspective, yes, we will always continue to add resources in the company directly. But really, it's really harvesting the breadth of the franchise around us. And as Ted mentioned earlier, the energy teams sourced 4 investment for us in the first -- in this first quarter, this past quarter. And we have expectations that not only might that pace continue, but we'll be able to replicate that type of activity in a couple of industries going forward.

Kannan Venkateshwar - Barclays Capital, Research Division

Okay. And broadly, your comments on the macro environment. You seem cautious, just given what's happening in Europe and so on. But when you look at the portfolio activity in terms of the assets that you originated, it's Chesapeake, it's Miller Energy. And Miller, from what I can gather thus far, hasn't really made money since it came into existence. So just given the comments on the environment doesn't seem to gel with the assets that are being originated? So just wanted to give some color on what the thoughts are on these new assets?

James Charles Zelter

Well, I think it's our view is that there is a -- when you make an enterprise loan, it really is based on a variety of assets that are either in the ground or you're very comfortable with. Certainly, our Chesapeake loan, that's an asset that will probably come out earlier than expected because of the robust nature of their -- and those announcements will be part of their asset sales. So it's one where it's been a very, very high returning asset for us in the limited period we're going to own it. Miller is one, where, as Ted said earlier, we have a view that there is a tremendous amount of embedded asset value in this company. Hopefully, the company will be able to harvest and capitalize on that into an earnings driven result for them. But if they are not able to do so, we have a very, very well secure vision that has a tremendous amount of collateral value. So certainly, it's our view that when we talk about the headwinds globally, we see a situation right now where rates are very, very, very low, performing credit is still quite strong, and we want to make sure that we're using the breadth of our platform not just to be buying performing credit at second lien rates that probably don't make sense for our vehicle, but certainly are able to use the knowledge of various assets and other platforms to create asset value for us.

Operator

You're next question comes from the line of Rick Shane with JPMorgan.

Richard B. Shane - JP Morgan Chase & Co, Research Division

Ted had mentioned that there was about $1 billion of liquid investments in the portfolio currently. I'm assuming that that's basically sort of the pool of liquidity that you will tap over the next 18 months to achieve the rotation in the portfolio. Is that the way to think of it? And we look at about 250 million sold off this quarter sort of that pace of rotation?

Edward J. Goldthorpe

Yes, I mean, I think it's a good question. I mean, I think, we think it's very important to have liquidity on our portfolio, but we feel like we want to best use our capital. So the good news is in terms of the repositioning of the portfolio, as great opportunities come in, we have the ability to kind of sell off other assets to take advantage of that. And secondly, we feel pretty good about where we are in terms of our leverage right now. Obviously, we've delevered quite a bit over the first 6 months -- over the last 6 months. Hence, we feel pretty good about being able to take advantage of opportunistic situations. So I think that the way you're thinking about is the right to think about it.

Richard B. Shane - JP Morgan Chase & Co, Research Division

Great. And can you provide just a little more color around that, what is the yield on that portfolio? Because when I think about it, given where the stock is trading versus NAV, your opportunity to create earnings is largely a function of being able to do what you did the most, in the most recent quarter.

Edward J. Goldthorpe

Yes, I mean, if you think about Jim's comment on the first set of questions that I mentioned the same thing. I mean, the assets we sold had a 10.6% yield and the stuff that we originated had a 13.1% yield. So despite the tight, despite credit spreads being pretty tight right now, we see opportunities to kind of monetize low-yielding investments in our portfolio, and we have some more of those, and redeploy that capital into kind of higher-yielding investments.

Richard B. Shane - JP Morgan Chase & Co, Research Division

And just to put a real fine point on that, that $1 billion portfolio that you spoke of, is that sort of in that 10.6%, 11% overall yield range?

Edward J. Goldthorpe

I'd have to go back and look at the numbers. But I don't think it would be widely off that number.

Operator

Your next question comes from the line of Jasper Burch with Macquarie.

Jasper Burch - Macquarie Research

In the $255 million of exits, how much of that was sales versus repayments?

Gregory W. Hunt

It was on, I believe, it's $89 million of repayments, and I think it was $160 million...

James Charles Zelter

Yes, approximately 160 of sales and around $90 million of prepayments.

Jasper Burch - Macquarie Research

Okay. And then in the past, you've given commentary on trading liquidity for yield. And looking at sort of the $250 million average EBITDA as the existing portfolio, I mean, that's still pretty high up there. And I'm just wondering sort of on the new investments, can you give us what the EBITDA on those were? And also, where you see the overall company size the you're lending [ph] to going?

James Charles Zelter

I mean, I think on a go-forward basis, you'll see that average EBITDA number come down. I think this quarter was skewed by Chesapeake, which is obviously a big -- is a very large company. But I think on a go-forward basis, I think one of the big things you'll see in our portfolio over time is we think our average EBITDA per company is coming down. And we've seen that kind of throughout this existing quarter.

Jasper Burch - Macquarie Research

Okay. That's helpful. And then just lastly, thank you for the color on the Madison yield. On the opening remarks, you mentioned that you're looking at doing a similar deal. Can you just give us some more color on sort of what sort of time frame you're looking at? And then same sort of leverage that you expect sort of that 4 to 1? And I guess, I mean, how large?

Gregory W. Hunt

Yes, I think, with regards to Madison and Kirkwood 1, we would expect that some time later this year, Kirkwood 2 would come to fruition. And I would expect it to be of similar size, similar structure and similar yield expectations to our portfolio. So we have a very active dialogue going on with Madison right now across a few fronts of our firm. So certainly that is in the -- we're well along our way, on structuring and developing that. So it would happen within the calendar year 2012.

Operator

[Operator Instructions] Your final question comes from the line of Jonathan Bock with Wells Fargo.

Jonathan Bock - Wells Fargo Securities, LLC, Research Division

Just curious, I know you talked about being very comfortable with your current leverage. But maybe give us a view on what that long-term leverage outlook looks like on a debt-to-equity basis?

James Charles Zelter

I think we've been pretty consistent the last couple of years. And even if we've talked our new strategy going forward the last 6 months, we talked about being in this 0.5 to 0.7 type of level. And I think we're comfortable in that zone right now. I think what you've heard Ted articulate, which we're very supportive of, is trying to make sure that we are not fighting leverage in a down market, but actually using down market's volatility to our advantage. So right now, we feel we have an abundance of liquidity, and we feel we could be -- obviously, the last 6 or 8 weeks, with what's happened in the credit market, assets have gone up, spreads have continued to tighten, that's benefited all of us who are credit investors. But realizing we've seen this movie before, if there were any kind of backdrop or reversal in the coming months, we'd have the capital to take advantage of that. But I think for modeling purposes, we're in a very comfortable range right now. And I think that broad range is 0.5 to 0.7. And we're probably operating, we're operating on a tighter range right now. But certainly, in the middle of that, we're very comfortable with.

Jonathan Bock - Wells Fargo Securities, LLC, Research Division

Okay, great. And then moving on to the Chesapeake investment. Ted, could you talk about how this investment is really representative of some of those proprietary transactions that you're shifting the portfolio towards over the next 18 to 24 months?

Edward J. Goldthorpe

Yes. I mean, that one is -- again, we have done a bunch of work in the company. We knew the credit internally at Apollo very, very well. And the company needed to get liquidity in a very short period of time. So we got a call over the weekend on a large deal that priced on Monday. And I think that we -- because we knew the company, we have an engineer in Houston who can actually do real engineering work for the company, we felt great about our collateral coverage. So I think the fact that we got the call over the weekend because it needed to move, needed to kind of sell off this loan pretty quickly, allowed us to do the deal. And as Jim said, it was just announced this week, that we'll probably be taken out either some time in the next 3 months, which will lead to a very high IRR on the actual investment.

Jonathan Bock - Wells Fargo Securities, LLC, Research Division

Okay, excellent. And then also, if you could maybe give us a sense of prepayment protection on Miller Energy?

James Charles Zelter

Yes, it has -- it was a very well structured transaction. Certainly, if the company were to achieve its revenue and earnings goals, we have ample protection in our security, the prepayment would result in a very positive return for us. So we look -- we always look at trading coupon for call per payments. As Ted mentioned earlier, this is a company that we really needed financing, and we felt comfortable with the assets, so we were able to structure what we think is very beneficial to our account.

Edward J. Goldthorpe

Yes, I mean, we spent something like 4 months doing due diligence, including many on-site diligence trips. We obviously went through the reserves very closely. And anytime you have a situation like this with a higher-yielding asset, we always insist on having very strong call protection.

Jonathan Bock - Wells Fargo Securities, LLC, Research Division

That makes sense. And just 2 small ones. So Ceridian [ph], as we've seen a lot of news items kind of across the wires of the past few months, can you talk about how you're looking at the risk/reward in that credit to date?

James Charles Zelter

Yes, sure. I mean, I think the way we think about that name is, they obviously just did a new deal this quarter, which is obviously been public information. And the use of proceeds was obviously to pay down some existing debt, which obviously, we own some of that existing debt. So I think the way to think about it is we think that the company just came out with earnings this week. Their earnings were very, strong. And we feel very, very good about that company. But it shouldn't be a surprise to anybody, just given the, our public filings, that these guys took out some debt over the last couple of months.

Jonathan Bock - Wells Fargo Securities, LLC, Research Division

And last question. So obviously stock's still below NAV, though it is edging a bit closer. And perhaps, if you could just update us on your views for the need of equity capital over time, maybe near-term and then how you're looking at capital issuance over the longer haul?

James Charles Zelter

I think right now, we are sufficiently capitalized from the equity account. I don't think there's a need for us to issue equity right now. We were -- we thought it made sense to do the actions we took place in the past quarter about issuing some stock as a sign of support, like we did from AGM. But I don't believe we are in need right now for any equity capital. Certainly, we're very happy with our revolver, which we put in place. And if there is opportunities in the future to term out some debt capital, we would do so. So I think we're very comfortable and patient right now.

Operator

That was our final question. And I'd like to turn the floor back over to Jim Zelter for any closing remarks.

James Charles Zelter

Well, first of all, thank you again for your great attendance on the call. We always appreciate the questions and the inquiry. And certainly, we look forward to talking in the coming months about our execution of our business plans. So thank you for your long-term support.

Operator

Thank you. This concludes today's conference call. You may now disconnect.

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